Question

Melrose Manufacturing has net sales revenue of $624,000, cost of goods sold of $274,560, net income of $95,360, and preferred dividends of $8,000 during the current year. At the beginning of the year, 402,400 shares of common stock were outstanding, and, at the end of the year, 429,600 shares of common stock were outstanding. A total of 1,000 preferred shares were outstanding throughout the year. The company's earnings per share for the current year is closest to:

Answer 1

Answer:

The company's earnings per share for the current year is closest to $21 per share.

Explanation:

For computing the earning per share, the following formula should be used which is shown below:

Earning per share = (Net income - Preferred dividend) ÷ average number of outstanding shares

where,

Average number of outstanding shares :

(Opening balance + ending balance) ÷ 2

= (402,400 + 429,600) ÷ 2

= 416,000

And, the net income is $95,360 and preferred dividend is $8,000

Now, put these values to the above formula

So,

Earning per share = ($95,360 - $8,000) ÷ 416,000 = $21 per share

The other things like : sales revenue, cost of goods sold is not be taken because net income is given in the question.

Hence, The company's earnings per share for the current year is closest to $21 per share.