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Crystal Arts, Inc., had earnings of $297,200 for 2016. The company had 42,000 shares of common...

Crystal Arts, Inc., had earnings of $297,200 for 2016. The company had 42,000 shares of common stock outstanding during the year. In addition, the company issued 2,200 shares of $100 par value preferred stock on January 3, 2016. The preferred stock has a dividend of $11 per share. There were no transactions in either common or preferred stock during 2016.

Determine the basic earnings per share for Crystal Arts. Round answer to two decimal places.
___$per share

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Answer #1

Solution:

Net income for 2016 = $297,200

Preferred dividend for 2016 = 2200*$11 = $24,200

Earnings available for common shareholders = Net Income - Preferred dividend = $297,200 - $24,200 = $273,000

Weighted average outstanding common shares = 42000

Basic earning per share = Earnings for common shareholders / Weighted average outstanding common shares

= $273,000 / 42000 = $6.50 per share

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