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Topic
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Ute Co. had the following capital structure during the previous and current years:
Preferred stock, $10 par, 4% cumulative, 25,000 shares
issued and outstanding $ 250,000
Common stock, $5 par, 200,000 shares
issued and outstanding $1,000,000
Ute reported net income of $500,000 for the current year ended December 31. Ute paid no preferred dividends
during the previous year and paid $16,000 in preferred dividends during the current year. In its current year December
31 income statement, what amount should Ute report as earnings per share?
$2.42
$2.45
$2.48
$2.50
Answer:
B Explanation:
Basic earnings per share, with a simple capital structure is equal to net income minus the preferred dividends declared
or the dividend preference on cumulative preferred stock for the current period (even though not declared) divided by
the number of shares of common stock and common stock equivalents outstanding. ($500,000 – $10,000) / 200,000
= $2.45. The cumulative preferred’s $10,000 dividend preference for the previous year that was paid in the current
year is not included in the calculation. The preferred dividends for the current year are included in the calculation,
regardless of whether they have been paid.
I got answer A, is the answer is wrong ? or I was wrong? Can anyone help ?
Step by step
BEC 75 2013/11
FAR 76 2014/10
AUD 87 2015/1
REG 83 2015/3
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