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4 November, 19:43

Company X had net income of $200,000 in the year 2016. At the beginning of 2016, there were 500,000 shares of outstanding common stock, and 200,000 more shares were issued on July 1, 2016. At the end of the year, Company X paid preferred stock dividends of $50,000 to shareholders. What is Company Xâs basic earnings per share?

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  1. 4 November, 21:54
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    Basic earning per share $0.21 per share

    Explanation:

    Basic Earning per share = (Net Income - Preferred stock dividend) / Weighted Average outstanding shares

    Basic Earning per share = ($200,000 - $50,000) / 700,000

    Basic Earning per share = $150,000 / 700,000

    Basic Earning per share = $0.2143 / share

    Weighted average Outstanding shares = 500,000 + 200,000

    Weighted average Outstanding shares = 700,000 shares
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