Crystal Arts, Inc., had earnings of $317,500 for 2016. The company had 33,000 sh

Question

Crystal Arts, Inc., had earnings of $317,500 for 2016. The company had 33,000 shares of The stock outstanding when a corporation has issued only one class of stock.common stock outstanding during the year. In addition, the company issued 4,100 shares of $100 par value A class of stock with preferential rights over common stock.preferred stock on January 3, 2016. The preferred stock has a Distributions of a corporation's earnings to stockholders.dividend of $5 per share. There were no transactions in either common or preferred stock during 2016.

Determine the basic earnings per share for Crystal Arts. Round answer to two decimal places.
$per share

Explanation / Answer

Earning Per Share = (Net Income - Dividend on preferred Stock) / Avg. No. of Common Stock O/s In this case, no preferred dividends were paid out. Earning Per Share = (317500 - 0)/33000 = $9.62 per share The problem does not indicate if the Preferred Stock is "Cumulative".   "Only preferred dividends actually declared in the current year are subtracted. The exception is when preferred shares are cumulative, in which case annual dividends are deducted regardless of whether they have been declared or not." So if the Preferred stock were "Cumulative" then the answer would be different. In that case, the answer would be: Earning Per Share = (317500 - (4100 Shares X $5))/33000 = $9 per share

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.