Question

Farah Snack Co has earnings after taxes of $128, 750. Interest expense for the year was $20,000: preferred dividends paid were $18, 750: and common paid were $30,000. Taxes were $15,000. The firm has 100,000 shares of common stock outstanding Earnings per share on the common stock was
A. $0.90
B. $1.10
C. $0.75
D. $0.80

Answer 1

Answer:

A. $0.90

Explanation:

Earning per share = (Net Income - dividends on preferred stocks)/average outstanding common shares

Particulars                                                               Amount

Earning After Tax                                                       128750

Taxes                                                                       15000

Earning before Tax & Interest Expense               143750

Interest Expense                                                      (20000)

Earning after Interest, but before Tax                       123750

Taxes                                                                       (15000)

Earning after Taxes                                               108750

Preferred Dividends                                               (18750)

Earning available for common stock holders       90000

common stock outstanding                                      100000

Earning per share                                                         0.9

Therefore, The outstanding Earnings per share on the common stock was $0.90