Question

Earnings per share

Financial statement data for the years 20Y5 and 20Y6 for Black Bull Inc. follow:

20Y520Y6

Net income$1,725,000 $2,578,500

Preferred dividends$60,000 $60,000

Average number of common shares outstanding90,000shares115,000shares

a. Determine the earnings per share for 20Y5 and 20Y6. Round to two decimal places.

20Y520Y6

Earnings per Share$ $

b. Is the change in the earnings per share from 20Y5 to 20Y6 favorable or unfavorable?

Answer 1

· Requirement [a] with workings

		20Y5	20Y6
A	Net Income	$1,725,000	$2,578,500
B	Preferred Dividends	$60,000	$60,000
C = A - B	Net Income for common stockholders	$1,665,000	$2,518,500
D	Average no. of common shares outstandings	90000	115000
E = C/D	Earnings per share = ANSWERS	$18.50	$21.90

· Requirement [b]

Yes, it is Favourable, because Earnings per share has INCREASED to $ 21.90 in 20Y6.