Fultz Company had 300,000 shares of common stock issued and outstanding at Decem

Question

Fultz Company had 300,000 shares of common stock issued and outstanding at December 31, 2014. During 2015, no additional common stock was issued. On January 1, 2015, Fultz issued 400,000 shares of nonconvertible preferred stock. During 2015, Fultz declared and paid $150,000 cash dividends on the common stock and $125,000 on the nonconvertible perferred stock. Net income for the year ended common stock and $125,000 on the nonconvertible preferred stock, December 31, 2015, was $800,000. What should be Fultz's 2015 earnings per common share, rouded to the nearest penny?

Explanation / Answer

Answer is $ 2.25 ascomputed below

Earnings per share (of common stock) for the year 2015 of Fultz company Earnings per share (EPS)   = (Net Income - preferred dividend)/ Average number of shares of common stock outstanding = ( $800,000 - $ 125,000)/ 300,000 shares = $675,000 / 300,000 = $       2.25

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