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EPS Junkyard Arts, Inc., had earnings of $484,100 for the year. The company had 48,000 shares of...

Question:

EPS Junkyard Arts, Inc., had earnings of $484,100 for the year. The company had 48,000 shares of common stock outstanding during the year and issued 4,300 shares of $150 par value preferred stock.

The preferred stock has a dividend of $11 per share.

There were no transactions in either common or preferred stock during the year.

Determine the basic earnings per share for Junkyard Arts for the year.

Round answer to two decimal places.

Earnings Per Share:

The common stockholders of the company are the real owners of the company. These are the investors who generally holde long-term interest in the company. It is likely for these stockholders to know how their investments are faring well each year. Earnings-per-share is the ratio useful to the investors to know how much the company is able to generate on the invested capital.

Answer and Explanation:


Basic Earnings Per Share:


Outstanding common stock shares of the company = 48,000 shares

Preferred stock capital = 4,300 outstanding shares * $150 par value = $645,000

Preference dividend payable = $11 per share * 4,300 = $47,300

Net income for the year = $484,100

Basic earnings per share = net income available to common stockholders/number of outstanding common shares

= (net income - preference dividend) / outstanding shares

= ($484,100 - $47,300) / 48,000 shares

= $436,800 / 48,000 shares

= $9.10

So, basic EPS = $9.10 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
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