Question

Exercise 13-16 Earnings per share LO A1 Ecker Company reports $2,700,000 of net income and declares $388,020 of cash dividends on its preferred stock for the year. At year-end, the company had 678,000 weighted average shares of common stock. 1. What amount of net income is available to common stockholders? Net income To preferred stockholders Net income available to common stockholders 2. What is the company's basic EPS? Basic Earnings per Share Choose Denominator: Choose Numerator: Basic Earnings per Share Basic earnings per share

Answer 1

1) Calculation of net income to common stockholders:
Net income to common stockholders= net income- dividend to preference stockholders= 2700000-388020= 2311980
Net income to stockholders= $2311980

2) Calculation of EPS:
EPS= Net income to stockholders/weighted average number of shares= 2311980/678000= 3.41
EPS= $3.41