jay_usa
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| Posted: 08 May 2009 at 09:36 | IP Logged
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Thanks Divya, for posting correct link.
__________________
Thanks
Jay CPA,CGMA,CITP,MBA
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ysjd.patel
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Joined: 12 Jan 2009
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Posts: 179
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| Posted: 08 May 2009 at 11:02 | IP Logged
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One more question...
Ute Co. had the following capital structure during 19X3 and 19X4:
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 year ended December 31, 19X4. Ute paid no preferred dividends during 19X3 and paid $16,000 in preferred dividends during 19X4. In its December 31, 19X4, income statement, what amount should Ute report as basic earnings per share?
solution:
$2.45 earnings per share.
19X3 19X4
Net income ? $ 500,000
Less: Cumulative preferred
Stock dividend "requirement"
($10 par x 25,000 shs x 4%) &nb sp; (10,000 ) ; (10,000)
Income available to common shares 490,000
Divide by average common shares O/S ÷ 200,000
Basic earnings per common share $ 2.45
Note: Since the preferred stock dividends are cumulative, when they are declared or paid is not relevant.
My doubt is: why they have deducted pref. divided of $10,000 and not $16,000 which given in question?
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