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Calculate basic EPS Net income was $659,250 for the year. Throughout the year the company had outstanding 18,000 shares of $2.50, $50 par value preferred stock and 105,000 shares of common stock.Required:Calculate basic earnings per share of common stock for the year.

Question

Calculate basic EPS Net income was $659,250 for the year. Throughout the year the company had outstanding 18,000 shares of $2.50, $50 par value preferred stock and 105,000 shares of common stock.
Required:
Calculate basic earnings per share of common stock for the year.

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Step 1

Earnings per share (EPS):

Earnings per share is the monetary earnings available to shareholder per common share that are outstanding. EPS helps in  determining the company's profitability.

Step 2

Calculate the value of preferred dividend:

(Number of perference
Preferred Dividend =
XDividend per preferred stock
shares outstanding
18,000x 2.50
= $45,000
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(Number of perference Preferred Dividend = XDividend per preferred stock shares outstanding 18,000x 2.50 = $45,000

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Step 3

Calculate the basic earnings per share...

Net Income -Preferred Dividend
Basic earnings per share =
Number of common shares outstanding
$659,250-S45,000
105,000 shares
=S5.85 per share
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Net Income -Preferred Dividend Basic earnings per share = Number of common shares outstanding $659,250-S45,000 105,000 shares =S5.85 per share

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