Determine the basic earnings per share for Junkyard arts for the year

Junkyard arts inc has earnings of $316,000 for the year.The company had 40,000 shares of common stock outstanding during the year and issued 15,000 shares of $50 par value preferred stock. The Preferred stock has a dividend of $1.60 per share.There were no transactions in either common or preferred stock during the year

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Expert Solution

Earnings per share : The amount of income made per share of outstanding common stock during a certain time period is expressed as earnings per share. This ratio is used to evaluate the shareholder profitability of a corporation.

Following formula can be used to calculate earnings per share

Earnings per share = Net income (loss) - Preferred Dividends / Average number of common shares outstanding

Calculation of basic earnings per share for junkyard arts for the year

Basic earnings per share = Net income - Preferred dividends / Average no.of. common shares outstanding

=$316,000 - ( No.of. Preferred shares x $1.60 per share) / 40,000 shares

=$316,000 - (15,000 x $1.60 per share) / 40,000 shares

=$7.3 per share

Therefore, the basic earnings per share for Junkyarts corporation for the year $7.3 per share

balaji rao answered 1 year ago

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