Question

Computing Earnings per Share Lee Corp. had 200,000 weighted average common shares outstanding in 2020 and 5,000 weighted average preferred shares outstanding in 2020. Lee Corp. reported net income of $450,000 in 2020, and declared and paid $50,000 and $10,000 of common stock and preferred stock dividends, respectively. Compute earnings per share for Lee Corp. for 2020.

Answer 1

Answer:

$2.20 per stock

Explanation:

Earnings per share (EPS) = (net income - preferred dividends) / weighted average stocks outstanding

• net income = $450,000
• weighted average stocks outstanding = 200,000
• preferred stock dividends = $10,000

earnings per share = ($450,000 - $10,000) / 200,000 = $440,000 / 200,000 = $2.20 per stock