Question

Epic Company earned net income of $784,000 this year. The number of common shares outstanding during the entire year was 420,000, and preferred shareholders received a $28,000 cash dividend. Compute Epic company's basic earning per share.

Answer 1

Answer:

The answer is $1.8/share

Explanation:

Basic Earnings Per Share (EPS)= (Net income - preferred shars) ÷ weighted number of outstanding shares

Net income - $784,000

Preferred shares - $28,000

Weighted number of outstanding shares - 420,000 shares

($784,000 - $28,000) ÷ 420,000 shares

= $756,000 ÷ 420,000 shares

= $1.8 per share.

This means that each shareholder has $1.8 per share from the net income of $784,000