Question

Coronado industries had 293000 shares of common stock issued and outstanding at december 31, 2017. no common stock was issued during 2018. on january 1, 2018, coronado issued 200000 shares of nonconvertible preferred stock. during 2018, coronado declared and paid $110000 cash dividends on the common stock and $79000 on the preferred stock. net income for the year ended december 31, 2018 was $618000. what should be coronado's 2018 earnings per common share? (rounded to the nearest penny)

Answer 1

The dividend on preferred stock is subtracted from net income before calculating earnings per share (EPS).

EPS = (Net Income – Preferred Dividend)/ No. of common stocks outstanding

= ($618,000 - $79,000)/ 293,000

= $1.84

Therefore, earnings per share would be $1.84.