Question

Mayan Company had net income of $32,670. The weighted-average common shares outstanding were 9,900. The company declared a $4,600 dividend on its noncumulative, nonparticipating preferred stock. There were no other stock transactions.
The company's earnings per share is:

A.) $2.84.

B.) $3.30.

C.) $2.59.

D.) $3.51.

E.) $3.76.

Answer 1

Answer:

The correct option is A ,earnings per share is $2.84

Explanation:

Earnings per share is given earnings attributable to ordinary shareholders divided weighted average common shares.

The net income needs to be adjusted to reflect only earnings distributable to common shares.

Earnings to common stocks=$32670-$4600

                                              =$28070

Weighted average common shares=9900

Earnings per share=$28070/9900

                                =$2.84 per share

Option B is wrong because it calculated earnings per share with net income instead of earnings of common shareholders($32670/9900=$3.30)