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26 September, 00:08

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 preferred stock and $60,000 on common stock. Earnings per share for 2017 is Select one: a. $1.30. b. $2.00. c. $1.00. d. $1.20. e. $1.50.

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  1. 26 September, 02:09
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    The correct answer is A

    Explanation:

    Computing the Earnings available for common stock as:

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

    where

    Net income = $300,000

    Dividend paid to preferred stock = $40,000

    Putting the values above:

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

    Earnings available for common stock = $260,000

    Now, computing the Earnings per share as:

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

    where

    Earnings available for common stock = $260,000

    Weighted average shares of common stock = 200,000 shares

    Putting the values above:

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

    Earnings per share = $1.30 per share
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