Net income was $240,000 for the year. Throughout the year the company had outstanding 12,000 shares of 6%, $50 par value preferred stock and 75,000 shares of common stock. Basic earnings per share of common stock for the year were:

Earning per share of common stock for the year = $2.72

Explanation:

Giving the following ;

Net income for the year = $240,000

Number of shares(preferred stock) outstanding = 12,000

Par value(preferred stock) = $50

Number of shares(common stock) outstanding= 75,000

Basic earning per share of common stock is given by;

Earning per share = Net income - preferred dividend) ÷ weighted average of common shares outstanding during the period

Dividend on preferred stock = 12000 × $50 × 0.06 = $36,000

Earning per share = $(240,000 - 36,000) ÷ 75,000

Earning per share = $204,000 ÷ 75,000 = $2.72

explanation:

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