At December 31, 2013, Hansen Corporation had 42,000 shares of common stock and 6,000 shares of 9%, $100 par cumulative preferred stock outstanding. No dividends were declared or paid in 2013. Net income was reported as $220,000. What is basic EPS? (Round your answer to 2 decimal places.)
Solution
Basic EPS is the amount of company\'s profit taht is available to its common stock shareholders. As we pay preferred shareholders before common stock holders , so we deduct the preferred dividend.
Basic EPS = (Net income - preferred dividend)/ weighted average number of shares
Net Income = $220000
Preferred dividend = 600000 x .09 = $54000
weighted number of shares ( assuming that all the shares were held by company for the whole year) = 42000
therefore,
Basic EPS = (220000 - 54000)/42000 = $3.95
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At December 31- 2013- Hansen Corporation had 42-000 shares of common s.docx
1. At December 31, 2013, Hansen Corporation had 42,000 shares of common stock and 6,000
shares of 9%, $100 par cumulative preferred stock outstanding. No dividends were declared or
paid in 2013. Net income was reported as $220,000. What is basic EPS? (Round your answer to
2 decimal places.)
At December 31, 2013, Hansen Corporation had 42,000 shares of common stock and 6,000
shares of 9%, $100 par cumulative preferred stock outstanding. No dividends were declared or
paid in 2013. Net income was reported as $220,000. What is basic EPS? (Round your answer to
2 decimal places.)
Solution
Basic EPS is the amount of company's profit taht is available to its common stock shareholders.
As we pay preferred shareholders before common stock holders , so we deduct the preferred
dividend.
Basic EPS = (Net income - preferred dividend)/ weighted average number of shares
Net Income = $220000
Preferred dividend = 600000 x .09 = $54000
weighted number of shares ( assuming that all the shares were held by company for the whole
year) = 42000
therefore,
Basic EPS = (220000 - 54000)/42000 = $3.95
