Question

At December 31, 2020 Rice Company had 300000 shares of common stock and 10000 shares of 6%, $100 par value cumulative preferred stock outstanding. No dividends were declared on either the preferred or common stock in 2020 or 2021. On January 30, 2022, prior to the issuance of its financial statements for the year ended December 31, 2021, Rice declared a 100% stock dividend on its common stock. Net income for 2021 was $1140000. In its 2021 financial statements, Rice's 2021 earnings per common share should be

Answer 1

Answer:

$1.80 per share

Explanation:

The computation of the earning per share is shown below:

Earning per share = (Net income - preference dividend) ÷ (weightage number of outstanding shares)

where,

Net income is = $1,140,000

Preference dividend is

= 10,000 × $100 × 6%

= $60,000

Weighted number of shares is

= 300,000 shares + 300,000 shares as 100% stock dividend is declared

= 600,000 shares

So the earning per share is

= ($1,140,000 - $60,000) ÷ (600,000 shares)

= $1.80 per share

We simply applied the above formula