[nyota]

Income Statement
June 30
Sales.. . $2,100,000
Costs of goods sold... 1,260,000
Gross margin... 840,000
Selling and administrative expenses... 660,000
Net operating income... 180,000
Interest expense... 30,000
Net income before taxes... 150,000
Income taxes(30%)... 45,000
Net income... $ 105,000

Balance Sheet June 30
Assets
Current assets:
cash... $ 21,000
Accounts receivable, net... 160,000
Merchandise inventory... 300,000
Prepaid expenses... 9,000
Total assets... 490,000
Property and equipment, net... 810,000
Total assets... 1,300,000

Liabilities and stockholder's Equity
Liabilities:
Current liabilities... $ 200,000
Bonds payable, 10%... 300,00
Total liabilities...
Stockholders' equity:...
Common stock, $5 per value... $100,000
Retained earnings... 700,000
Total stockholders' equity... 800,000
Total liabilities and stockholders' equity... 1,300,000

Additional information, corporation pid dividends of $3.15 per share during the year. Company's common stock had a market price of $63 per share on June 30, and there was no change in the number of outstanding shares of common stock during the fiscal year.

My answer is:

I used the formula:
net income - preferred dividends/average number of common shares outstanding
Net income (105,000), since there was no preferred shares, no deductions from the net income. The next step was to divide by average # common shares outstanding(100,000), and I came up with $1.05

$105,000/$100,000=$1.05 (earnings per share)

Did I calculate this correctly?

[hamzashakaa]

Actually you should divide the net income by 20,000 outstanding shares($100,000/$5 PAR VALUE) but instead you divided the net income by the amount of outstanding stocks.

[nyota]

Actually you should divide the net income by 20,000 outstanding shares($100,000/$5 PAR VALUE) but instead you divided the net income by the amount of outstanding stocks.

Hamzashakaa,

Thank you.