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Chapter 13: Q16SE (page 711)

Computing earnings per share

HEB Corporation had net income for 2018 of \(60,450. HEB had 15,500 shares of common stock outstanding at the beginning of the year and 20,100 shares of common stock outstanding as of December 31, 2018. During the year, HEB declared and paid preferred dividends of \)2,600. Compute HEB’s earnings per share.

Short Answer

Expert verified

Earnings per share of the company is $3.25

Step by step solution

01

Computation

Averageoutstandingcommonstock=Beginningcommonstock-Endingcommonstock2=15,500+20,1002=17,800shares

02

 Step 2: Calculation of earnings per share

Earnings Per Share

Net Income

$60,450

Less: Preference dividend

($2,600)

a

$57,850

b. Average outstanding common stock

17,800

Earnings per share (a/b)

$3.25

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Most popular questions from this chapter

Question: Journalizing a small stock dividend

Element Water Sports has 13,000 shares of \(1 par value common stock outstanding.

Element distributes a 5% stock dividend when the market value of its stock is \)15 per share.

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1. Journalize Element’s declaration of the stock dividend on August 15 and distribution on August 31.

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Computing earnings per share and price/earnings ratio

Rocket Corp. earned net income of \(153,040 and paid the minimum dividend to preferred stockholders for 2018. Assume that there are no changes in common shares outstanding during 2018. Rocket’s books include the following figures:

Preferred Stock—6%, \)60 par value; 2,000 shares authorized, 1,000

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