Question

Elite Trailer Parks has an operating profit of $307,000. Interest expense for the year was $32,000; preferred dividends paid were $31,600; and common dividends paid were $41,800. The tax was $65,100. The firm has 21,400 shares of common stock outstanding. Required:a. Calculate the earnings per share and the common dividends per share for Elite Trailer Parks.b. Wnat was the Increase in retained eings for the year?

Answer 1

a. $8.33

$1.95

b.$136,500

Explanation:

The computation of earnings per share and the common dividends per share is shown below:-

a. Earning per share = Earnings Available to Common Stockholders ÷ Number of Shares of Common Stock Outstanding

= $178,300 ÷ 21,400

= $8.33

Dividends per Share = $41,800 ÷ 21,400

= $1.95

b. Increase in retained earnings = Operating Profit (EBIT) - Interest expense - Taxes - Preferred dividends - Common dividends

= $307,000 - $32,000 - $65,100 + $31,600 + $41,800

= $136,500

We simply applied the above formulas