Question

Elite Trailer Parks has an operating profit of $282,000. Interest expense for the year was $38,900;...

Elite Trailer Parks has an operating profit of $282,000. Interest expense for the year was $38,900; preferred dividends paid were $27,500; and common dividends paid were $43,700. The tax was $65,700. The firm has 25,100 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?  
  

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Answer #1

Solution:

a)Computation of Earning Per Share (EPS)

Amount($)
Operating Profit 282,000
Less:Interest 38,900
Less:Income Tax 65,700
Less:Preferred dividend 27,500
Earning Available for Common Stockholders 149,900

EPS=Earning Available for Common Stockholders/No. of shares outstanding

=$149,900/25,100 shares

=$5.97

Thus Earning Per Share is $5.97

Computation of common dividends per share for Elite Trailer Parks

Common dividends per share =Common dividends Paid/No. of shares outstanding

=$43,700/25,100

=$1.74

Thus,Common dividends per share for Elite Trailer Parks is $1.74

b)Computation of increase in retained earnings for the year

=Earning Available for Common Stockholders-Common dividends paid

=$149,900-$43,700

=$106,200

Thus,increase in retained earnings for the year is $106,200.

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