Table 18-9
Partridge Company provides the following information for the year 2017:
$\begin{array}{|l|l|}
\hline \text { Net income } & \$ 32,600 \
\hline \text { Market price of common shares } & \$ 2,00 / \text { share } \
\hline \text { Dividends paid - common shares } & \$ 0,10 / \text { share } \
\hline \text { Dividends paid - preferred shares } & \$ 1,00 / \text { share } \
\hline \text { Preferred shares outstanding at December } 31,2017 & 20,000 \text { shares } \
\hline \text { Common shares outstanding at December 31,2017 } & 150,000 \text { shares }\\hline
\end{array}$ Note: There were no new preferred shares issued in 2017; 60,000 common shares were issued on September 30, 2017.
-Refer to Table 18-9.How much was the earnings per share for 2017?
A) $0.22
B) $0.30
C) $0.12
D) $0.08

Question

Table 18-9
Partridge Company provides the following information for the year 2017:
 $\begin{array}{|l|l|}
\hline \text { Net income } & \$ 32,600 \
\hline \text { Market price of common shares } & \$ 2,00 / \text { share } \
\hline \text { Dividends paid - common shares } & \$ 0,10 / \text { share } \
\hline \text { Dividends paid - preferred shares } & \$ 1,00 / \text { share } \
\hline \text { Preferred shares outstanding at December } 31,2017 & 20,000 \text { shares } \
\hline \text { Common shares outstanding at December 31,2017 } & 150,000 \text { shares }\\hline
\end{array}$ Note: There were no new preferred shares issued in 2017; 60,000 common shares were issued on September 30, 2017.
-Refer to Table 18-9.How much was the earnings per share for 2017?
A) $0.22
B) $0.30
C) $0.12
D) $0.08

Quizplus · Accepted Answer

Earnings per share (EPS) is calculated by subtracting preferred dividends from net income and then dividing by the weighted average number of common shares outstanding. The preferred dividends are $20,000 (20,000 shares * $1.00/share). The net income is $32,600. The weighted average number of common shares is calculated considering the issuance of new shares during the year. For 9 months, there were 90,000 shares (150,000 - 60,000), and for 3 months, there were 150,000 shares. The weighted average is $((90,000 * 9/12) + (150,000 * 3/12)) / 12 = 105,000$ shares. The EPS is $(\$32,600 - \$20,000) / 105,000 = \$0.12$.

Table 18-9 Partridge Company Provides the Following Information for the Year

Table 18-9
Partridge Company Provides the Following Information for the Year