Answer:
Basic Earnings Per Share = $2.45
Explanation:
Expectation: Calculate the Basic Earnings per Share
First, what is the net income for the year= $500,000
Preference dividend = $16
However, since the preference share is cumulative and no preference dividend was paid in the first year. It means the preference dividend of $16,000 paid was both for the first and second year
Hence, preference dividend for the second year = 4% x $250,000= 0.04x $250,000= $10,000
As such the Basic earning per share
= (Net income - Preference Dividend for the year 2)/Outstanding common shares
= ($500,000- $10,000)/200,000 shares
=$2.45
