Calculate earnings per share a Net income 240000 b Preferred

Calculate earnings per share:

a. Net income, $240,000

b. Preferred shares issued, 6,000

c. Average number of common stock shares issued, 24,000

d. Cash dividends declared and paid on common stock, $30,000

e. Market price per share, $36

f. Average treasury shares of common stock, 4,000

Solution

Net income = $240,000
Average number of common stock shares issued = 24,000
Average treasury shares of common stock = 4,000

Average number of common stock outstanding = Average number of common stock shares issued - Average treasury shares of common stock
Average number of common stock outstanding = 24,000 - 4,000
Average number of common stock outstanding = 20,000

Earnings per share = (Net income - Preferred stock dividend) / Average number of common stock outstanding
Earnings per share = ($240,000 - $0) / 20,000
Earnings per share = $240,000 / 20,000
Earnings per share = $12.00