Question

At December 31, 2017 Sheridan Company had 294000 shares of common stock and 9500 shares of 6%, $100 par value cumulative preferred stock outstanding. No dividends were declared on either the preferred or common stock in 2017 or 2018. On January 30, 2019, prior to the issuance of its financial statements for the year ended December 31, 2018, Sheridan declared a 100% stock dividend on its common stock. Net income for 2018 was $1148000. In its 2018 financial statements, Sheridan's 2018 earnings per common share should be (rounded to the nearest penny)

Answer 1

Answer:

1.85

Explanation:

The working note for the answer to the above question is:

Net income (A)                                           1,148,000

Less:

Preferred devidend (B)                                   50500

Earning available C=A-B                            1,097,500

Devidend By

Number of share outstanding                  594,000

Earning Per share (LVC)                                     1.85

Number of share outstanding

=297 ,000 share +100% stock devidend

=297,000+297000

=594,000

Answer 2

Answer:

Earnings per common share =   $1,034,000/294,000 = $3.52

Explanation:

Earnings for year 2018

Net Income                                    $1,148,000

Cummulative Preferred dividend

( 6% * $100 * 9500)*2                     (  114,000)

Earnings                                            1,034,000

Before calculating the earning per share, earnings must have been determined. to determine earnings, the prefered dividend have to deducted. since prefered dividend is cummulative, it means that such dividend will be carried forward to year when company make profit if it is not paid in any year.