Clair, Inc. reports net income of $700,000. It declares and pays dividends of $100,000 for the year, one-half of which relate to the preferred shares. The weighted-average number of common shares outstanding during the year is 200,000 shares, and the weighted-average number of preferred shares outstanding during the year is 10,000 shares. Earnings per share for Clair, Inc. is (round your answer to the nearest cent) : (LO 4)

(a) $3.18.

(b) $3.25.

(c) $3.30.

(d) $2.95.

Question

Business

Grady Hudson

19 January, 14:59

Clair, Inc. reports net income of $700,000. It declares and pays dividends of $100,000 for the year, one-half of which relate to the preferred shares. The weighted-average number of common shares outstanding during the year is 200,000 shares, and the weighted-average number of preferred shares outstanding during the year is 10,000 shares. Earnings per share for Clair, Inc. is (round your answer to the nearest cent) : (LO 4)

(a) $3.18.

(b) $3.25.

(c) $3.30.

(d) $2.95.

+5

Answers (1)

Know the Answer?

Jaida Salas · Answer 1

Option (b) is correct.

Explanation:

Net income for common shares = Net income - Preferred dividend

= $700,000 - (100,000 : 2)

= $650,000

weighted-average number of common shares outstanding = 200,000 shares

Earning per share:

= Net income for common shares : weighted-average number of common shares

= $650,000 : 200,000

= 3.25