uring 2016 shares of 6% preferred stock outstanding. The preferred stock does no

Question

uring 2016 shares of 6% preferred stock outstanding. The preferred stock does not have cumulative or convertible features. Angel declared and paid cash dividends of $300,000 and $150,000 to common and preferred shareholders, respectively, during , Angel Corporation had 900,000 shares of common stock and 50,000 2016. On January 1, 2015, Angel issued $2,000,000 of convertible 5% bonds at face value. Each $1,000 bond is convertible into five common shares. The Angel's net income for the year ended December 31, 2016, was $6 million. income tax rate is 20%. What is Angel's basic earnings per share for 2016, rounded to the nearest cent? A) $5.29. B) S6.50. C) $5.57. D) None of these answer choices is correct.

Explanation / Answer

Calculate basic earning per share :

Earning per share = (net income-Preferred dividend)/Common share outstanding

                           = (6000000-150000)/900000

Earning per share = 6.50 per share

so answer is b) $6.50

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