Kelly has decided to start his own business giving sailing lessons. To purchase equipment for the business, Kelly withdrew $1,00
1 answer:
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Answer:
$28.5
Explanation:
Earnings per share is calculated for Equity shares.
And the treasury stock is not included.
Total equity shares in number = 11,000 - 1,000 (Treasury stock)
= 10,000 shares
Total earnings = $200,000
Further provided that dividend to preference shareholders is paid.
Dividend on preference capital is fixed, that is the rate multiply the par value, dividend is not paid on security premium amount.
Preference dividend = 5,000 $50
6% = $15,000.
The information provided for share issue rates is of no importance of equity, whereas the relevant number provided is important.
Thus earnings after preference dividend = $200,000 - $15,000 = $285,000
Earnings per share = $285,000/10,000 = $28.5 per share.