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I am confused on what numbers to put into "average common shares outstanding" in the equation for calculating earnings per share.

Earnings Per Share= (Net Income-Preferred Stock Dividends) / (Average Common Shares Outstanding)

The pictured I posted gives you more information about the problem. However, so far, I have set up the problem in the following way.

2006 2005
=(23,516-0) / (69,716,682 +?) =(19,353-0) / (72,152,844 + ?)

You almost have the problem correct.

First you need to get the average shares outstanding for year 2006. The formula will be (Ending shares outstanding @ 2006 year eand + the Ending shares outstanding @ 2005 year end) divided by 2. This number will be your average shares outstanding for year 2006.

Next you divide Net Income by the number calculated above, since there are no outstanding Preferred shares.

Thanks for your help. I really appreciate it :)