Question

At December 31, 2021 and 2020, P Co. had 67,000 shares of common stock and 6,700 shares of 5%, $100 par value cumulative preferred stock outstanding. No dividends were declared on either the preferred or common stock in 2021 or 2020. Net income for 2021 was $755,000. For 2021, basic earnings per common share amounted to: (Round your answer to 2 decimal places.) Multiple Choice $10.77. $5.00. $10.72.

Answer 1

Answer:

The basic earnings per share is $10.77

Explanation:

Basic earnings per share is the earnings specifically for common stockholders.

This is computed by dividing earnings after preferred dividends with weighted average number of common stock which is the same as the common stock outstanding  of 67,000 shares.

Earnings after preferred dividends=$755,000-(6700*5%*$100)

                                                         =$755,000-$33,500

                                                         =$721,500

Basic earnings per share=$721,500/67000=$10.77

The correct option is first one of the multiple choices provided