he net income of Foster Furniture, Inc., amounted to $1,600,000 for the current year. a. Compute...

he net income of Foster Furniture, Inc., amounted to $1,600,000 for the current year. a. Compute the amount of earnings per share assuming that the shares of capital stock outstanding throughout the year consisted of: 1. 400,000 shares of $1 par value common stock and no preferred stock. 2. 100,000 shares of 8 percent, $100 par value, cumulative preferred stock and 300,000 shares of $5 par value common stock. b. Is the earnings per share figure computed in part a(2) considered to be basic or diluted?

Compute the amount of earnings per share assuming that the shares of capital stock outstanding throughout the year consisted of 400,000 shares of $1 par value common stock and no preferred stock. (Round your answer to 2 decimal places.

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Expert Solution

	Case a	Case b
Net Income	1,600,000	1,600,000
Less: Preferred Dividend	-	800,000
Earnings available for Common Stockholders	1,600,000	800,000
Number of Common Shares	400,000	300,000
Earnings per Share	4.00	2.67

It is considered as basic earnings per share. Diluted earnings is earnings per share calculated after considering potential equity shares in future

ekkarill92 answered 1 year ago

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