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Jen Co. had 200,000 shares of common stock and 20,000 shares of 10%, $100 par value cumulative preferred stock. No dividends on common stock were declared during the year. Net income was $2,000,000. What was Jen’s basic earnings per share?

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saqib097

Answer:

Jen’s basic earnings per share was $9.00

Explanation:

The formula for basic earning per share is:

= [tex]\frac{Net Income-Preferred Dividends}{weighted-average common shares outstanding}[/tex]

Net Income is $2,000,000

Preferred stock dividends are $100 X 10% X 20,000 shares = $200,000.

Shares Outstanding are 200,000.

Basic EPS is ($2,000,000 – $200,000) ÷ 200,000 = $9.00 per share.