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Compute EPS and diluted EPS Birch No capital changes Profit: 2016 $200,000 2017 $225,000 Outstanding 100,000...

Compute EPS and diluted EPS

Birch No capital changes

Profit: 2016 $200,000

2017 $225,000

Outstanding 100,000 shares common and 5,000 shares $100 par 4% cumulative preferred.

**SHOW WORK!!

Business   Accounting   
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Answer #1

Calculation of Earnings Per Share (EPS)

Year 2016

Profit = $200,000

Less- Dividend on Cumulative Preferred Shares= (5,000 shares*$100)*4% = $20,000

Earnings available for equity shareholders= $180,000

EPS = Earnings available for equity shareholders/ Outstanding equity shares

= $180,000/100,000 Shares

= $1.8 Per Share

Year 2017

Profit = $225,000

Less- Dividend on Cumulative Preferred Shares= $20,000

Earnings available for equity shareholders= $205,000

EPS = $205,000/100,000 Shares

= $2.05 Per Share

Note- Diluted Earnings per share will be same as the Earnings per share as their are no dilutive securities such as convertible debentures, stock options etc in the question.

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