Question

Blanco, Inc. has a net income of $300,000 for 2017, and there are 200,000 weighted-average shares of common stock outstanding. Dividends declared and paid during the year amounted to $40,000 on preferred stock and $60,000 on common stock. Earnings per share for 2017 is Select one: a. $1.30. b. $2.00. c. $1.00. d. $1.20. e. $1.50.

Answer 1

Answer:

The correct answer is A

Explanation:

Computing the Earnings available for common stock as:

Earnings available for common stock = Net income - Dividend paid to preferred stock

where

Net income = $300,000

Dividend paid to preferred stock = $40,000

Putting the values above:

Earnings available for common stock = $300,000 - $40,000

Earnings available for common stock = $260,000

Now, computing the Earnings per share as:

Earning per share =Earnings available for common stock / Weighted average shares of common stock

where

Earnings available for common stock = $260,000

Weighted average shares of common stock = 200,000 shares

Putting the values above:

Earnings per share = $260,000 / 200,000 shares

Earnings per share = $1.30 per share