Bowler Company reports net income of $700,000. It declares and pays dividends of $100,000 for the year, one-half of which relate to the preferred shares. The weighted-average number of common shares outstanding during the year is 200,000 shares, and the weighted-average number of preferred shares outstanding during the year is 10,000 shares. Earnings per share for Bowler Company is (round your answer to the nearest cent):
A) $3.18
B) $3.25
C) $3.30
D) $2.95.

Question

Quizplus · Accepted Answer

Earnings per share (EPS) is calculated as (Net Income - Preferred Dividends) / Weighted-Average Common Shares Outstanding. Preferred dividends are $50,000 (half of $100,000). Thus, EPS = ($700,000 - $50,000) / 200,000 = $3.25.

Bowler Company Reports Net Income of $700,000