9. At December 31, 2012 Rider Company had 400,000 shares of commonstock and 10,0

Question

9. At December 31, 2012 Rider Company had 400,000 shares of commonstock and 10,000 shares of 9%, $100 par value cumulative preferred stockoutstanding. No dividends were declared on either the preferred orcommon stock in 2013 or 2014. On January 30, 2015, prior to the issuanceof its financial statements for the year ended December 31, 2014, Riderdeclared a 100% stock dividend on its common stock. Net income for 2014was $2,114,000. In its 2014 financial statements, Rider's 2014 earnings per

common share rounded to the nearest penny should be
a. $2.40.b. $2.53.c. $4.80.d. $2.27.

Explanation / Answer

= [ 2,114,000 - ( 10,000 x 100 x 0.09 ) ] / ( 400,000 x 2 )

= [ 2,114,000 - ( 90,000 ) ] / ( 800,000 )

= [ 2,024,000 ] / ( 800,000 )

= $ 2.53

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