Question

E4.10 (LO 3) (Earnings per Share) The stockholders' equity section of Hendly Corporation appears below as of December 31, 2020. 8% preferred stock, $50 par value, authorized 100,000 shares, outstanding 90,000 shares $ 4,500,000 Common stock, $1.00 par, authorized and issued 10 million shares 10,000,000 Additional paid-in capital 20,500,000 Retained earnings (includes 2020 net income of $33,000,000) 167,000,000 Net income $202,000,000 Net income for 2020 reflects a total effective tax rate of 20%. Included in the net income figure is a loss of $18,000,000 (before tax) as a result of a non-recurring major casualty. Preferred stock dividends of $360,000 were declared and paid in 2020. Dividends of $1,000,000 were declared and paid to common stockholders in 2020.

Answer 1

Answer-:

Eps stands for Earnings per share and is calculated by dividing earning available for common stockholders by weighted average number of common stock.

EPS can be calculated as follows-:

Particulars	Amount
Net Income	33,000,000
Add: Dividend Paid to preference holders	360,000
Add: Dividend Paid to common stock holders	1,000,000
Net Income after taxes	34,360,000
Add: Tax Amount (34,360,000/ 80%) x 20%	8,590,000
Net Income before taxes	42,950,000
Less: Extra ordinary loss	(18,000,000)
Net Income before tax	24,950,000
Less: Tax at 20%	(4,990,000)
Net Income after taxes	19,960,000
Less: Prefrence dividend	(360,000)
Income available for common stockholders (A)	19,600,000
Outstanding shares (B)	10,000,000
Earning per share (A/B)	1.96

Thankyou ..........