Question

Elite Trailer Parks has an operating profit of $250,000. Interest expense for the year was $32,000; preferred dividends paid were $32,700; and common dividends paid were $38,300. The tax was $63,500. The firm has 24,100 shares of common stock outstanding.

a. Calculate the earnings per share and the common dividends per share for Elite Trailer Parks. (Round your answers to 2 decimal places.)

b. What was the increase in retained earnings for the year?

Answer 1

Answer:

a.  $5.05 per share , $1.59 per share

b. $83,500

Explanation:

a.  Earning per share = (Net income - preference dividend) ÷ (Number of shares)

where,  

Net income = Operating profit - interest expense - income tax expense

                   = $250,000 - $32,000 - $63,500

                   = $154,500

And, the other items values would remain the same

Now put these values to the above formula  

So, the value would equal to

= ($154,500 - $32,700) ÷ (24,100 shares)

= $5.05 per share

Dividend per share = (common dividend) ÷ (number of shares)

= ($38,300) ÷ (24,100 shares)

= $1.59 per share

b. The computation of the increase in retained earning is shown below

= Operating profit - interest expense - preferred dividends paid -  common dividends paid -  income tax expense

= $250,000 - $32,000 - $32,700  - $38,300 - $63,500

= $83,500