[enrika68]

6%preferred stock,$50 par value, authorized
100,000 shares, outstanding 90,000 shares $4,5000,000
Common stock, $1 par authorized and issued 10 million shares 10,000,000
Additional paid-in capital 20,500,000
Retained earnings $134,000,000
Net income 33,000,000 167,000,000
$202,000,000
Net income for 2010reflects a total effective tax rate of 34%.Included in the net income figure is a loss of $12,000,000(before tax) as a result of major casualty, which should be classified as an extraordinary item. Preferred stock dividends of $270,000 were declared and paid in 2010.Dividends of $ 1,000,000 were declared and paid to common stockholders in2010.


Question Compute earnings per share as it should appear on the income statement.


EPS= Net income-preferred dividends/ common shares outstanding= 33,000,000-270,000/90,000=363.6

Is that correct?

[morgaine300]

The 90,000 is outstanding shares for preferred stock, not common.

Also, you need to divide down between earnings before extraordinary item and on the extraordinary item itself. What you've done is for bottom-line net income, but you also have to do an individual EPS on income before stuff like extraordinary items and discontinued operations, and then also do one on the special item itself.

There's sort of an example of that in this thread:
https://www.askmehelpdesk.com/accoun...fo-224643.html

[enrika68]

Thank you very much, I know what you mean.Thanks.