Question

Capital Consulting Company had 390,000 shares of common stock outstanding on December 31, 2017. On that date, there were also 4,900 shares of $100 par, 7% noncumulative preferred stock outstanding. On March 1, 2018, the company's common stock split 2-for-1. On December 15, 2018, a preferred dividend was declared and paid in the amount of $24,000. Net income for 2018 was $2,900,000. Required: Compute basic earnings per share for the year ended December 31, 2018.

Answer 1

Answer:

Basic earning per share = $3.69

Explanation:

Earning per share (EPS) = earnings available to ordinary shareholders/ number of ordinary shares

Number of ordinary shares = 390,000 × 2 = 780,000 units

Net income                                           2,900,000

Preferred dividend                                ( 24,000)

Earnings available to shareholders     2,876,000

Number of ordinary shares                   780,000 units

Earnings per shares =   $2,876,000/780,000 units

                                  = $3.69