Answer:
a. Earnings per share = (Operating profit - Interest expense - Tax - Preferred dividends) / Common stock outstanding
Earnings per share = ($200,000 - $10,000 - $61,250 - $18,750) / $20,000
Earnings per share = $110,000 / 20,000 Shares
Earnings per share = $5.5 per share
Common dividends per share = Dividend paid / Common stock outstanding
Common dividends per share = $30,000 / 20,000 Shares
Common dividends per share = $1.50 per share
b. What was the increase in retained earnings for the year?
Increase in retained earnings = $110,000 - Common dividend paid
Increase in retained earnings = $110,000 - $30,000
Increase in retained earnings = $80,000
So, the increase in retained earnings for the year is $80,000.
