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Sheridan Company had 305000 shares of common stock issued and outstanding at December 31, 2020. During 2021, no additional common stock was issued. On January 1, 2021, Sheridan issued 407000 shares of nonconvertible preferred stock. During 2021, Sheridan declared and paid $182000 cash dividends on the common stock and $147000 on the nonconvertible preferred stock. Net income for the year ended December 31, 2021, was $954000. What should be Sheridan's 2021 earnings per common share, rounded to the nearest penny

Respuesta :

Answer:

$2.65

Explanation:

In this question, we are asked to calculate the earnings per common share of Sheridan’s 2021 earnings.

It is otherwise abbreviated as EPS and it can be defined as the worth of a company’s profit assigned to its share.

Mathematically, its can be calculated by subtracting preferred dividends from net income and divided by the weighted average common shares outstanding.

EPS = (Net income - dividends on preferred stock)/Average outstanding common shares

From the question, net income = $954,000 , dividends on preferred stock = $147,000 and average outstanding common shares = 305,000

EPS = (954,000-147,000)/305,000 = 807,000/305,000 = $2.65