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Blanco, Inc. has a net income of $300,000 for 2017, and there are 200,000 weighted-average shares...

Question:

Blanco, Inc. has a net income of $300,000 for 2017, and there are 200,000 weighted-average shares of common stock outstanding. Dividends declared and paid during the year amounted to $40,000 on the preferred stock and $60,000 on the common stock. The earning per share for 2017 is?

Earnings Per Share

The earnings per share is computation of earning earned by each individual common stock. A higher earning per share shows more profit maximization. The earnings per share is computed dividing the earnings available for common stock by the number of common stock outstanding.

Answer and Explanation:


The earning per share is $1.30 per share

Explanation

Step 1

Earnings available for common stock = Net income - Dividend paid to preferred stock

Here,

  • Net income = $300,000
  • Dividend paid to preferred stock = $40,000

So,

Earnings available for common stock = $300,000 - $40,000 = $260,000


Step 2

Earning per share =Earnings available for common stock / Weighted average shares of common stock

Here,

  • Earnings available for common stock = $260,000
  • Weighted average shares of common stock = 200,000 shares

So,

Earnings per share = $260,000 / 200,000 shares = $1.30 per share


Learn more about this topic:

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How to Calculate Earnings Per Share: Definition & Formula

from Introduction to Business: Homework Help Resource

Chapter 24 / Lesson 14
111K

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