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Junkyard Arts, Inc., had earnings of $316,000 for 2016. The company had 40,000 shares of common...

Junkyard Arts, Inc., had earnings of $316,000 for 2016. The company had 40,000 shares of common stock outstanding during the year. In addition, the company issued 15,000 shares of $50 par value preferred stock on January 9, 2016. The preferred stock has a dividend of $1.60 per share. There were no transactions in either common or preferred stock during 2016. Determine the basic earnings per share for Junkyard Arts.

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Answer #1
Solution:
Basic earnings per share (EPS) =$7.30 per share
Working Notes:
Basic earnings per share (EPS) = Earning for equity shareholders / Number of equity shares outstanding
=$292,000/40,000
=$7.30 per share
Earnings for equity shareholders = Net income - Preferred dividend
=$316,000 - ($1.60 x 15,000)
=$316,000 - $24,000
=$292,000
Please feel free to ask if anything about above solution in comment section of the question.
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