Elite Trailer Parks has an operating profit of $224,000. Interest expense for the year was $35,100;...

Elite Trailer Parks has an operating profit of $224,000. Interest expense for the year was $35,100; preferred dividends paid were $28,900; and common dividends paid were $40,000. The tax was $62,500. The firm has 18,700 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?

Expert Solution

Answer:

(a)

Particulars	Amount (in $)
Operating Profit	2,24,000.00
Less: Interest expense	35,100.00
Profit before taxes	1,88,900.00
Less: Taxes	62,500.00
Profit after tax	1,26,400.00
Less: Preferred Dividends	28,900.00
Earnings available for equity shareholders	97,500.00

Earnings per share = Earnings available for equity shareholders / Number of shares outstanding
Earnings per share = 97,500 / 18700 = 5.21
Therefore, Earnings per share = 5.21

Common dividends = $40,000
Common dividends per share = 40,000 / 18700 = 2.14
Therefore, Dividend per share = 2.14

(b) Increase in retained earnings for the year = Earnings available for equity shareholders - Common dividend paid
Increase in retained earnings for the year = $ (97,500 - 40,000) = $57,500
Therefore, increase in retained earnings = $57,500

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