Question

Fultz Company had 300,000 shares of common stock issued and outstanding at December 31, 2017. During 2018, no additional common stock was issued. On January 1, 2018, Fultz issued 400,000 shares of nonconvertible preferred stock. During 2018, Fultz declared and paid $180,000 cash dividends on the common stock and $150,000 on the nonconvertible preferred stock. Net income for the year ended December 31, 2018, was $960,000. What should be Fultz's 2018 earnings per common share, rounded to the nearest penny?

Answer 1

$2.7 per share

Step-by-step explanation:

Given that,

shares of common stock issued and outstanding = 300,000

Dividends on the nonconvertible preferred stock = $150,000

Net income for the year ended December 31, 2018 = $960,000

Earnings per share:

= (net income - preferred dividend) ÷ Number of shares outstanding

= ($960,000 - $150,000) ÷ 300,000

= $2.7 per share