In 2014, Linz Corporation reported an extraordinary loss of $1,000,000, net of tax. It declared and paid preferred stock dividends of $100,000 and common stock dividends of $300,000. During 2014, Linz had a weighted average of 500,000 common shares outstanding. As a result of the extraordinary loss, net of tax, the earnings per share would decrease by
A) $1.20
B) $1.40
C) $1.80
D) $2.00

Question

Quizplus · Accepted Answer

The earnings per share (EPS) decrease due to the extraordinary loss is calculated by dividing the loss by the weighted average of common shares outstanding. Thus, $1,000,000 / 500,000 shares = $2.00 decrease in EPS.

In 2014, Linz Corporation Reported an Extraordinary Loss of $1,000,000