Tyler Co: Compute earnings per share for common considering preferred dividends

At December 31, Tyler Co. has $500,000. of $100 par value, 8% cumulative preferred stock outstanding and $2,000,000. of $10. par value common stock issued. Tyler's net income for the year is $1,000,000.

Compute earnings per share of common stock for the year under the following independent situations.

A. The dividend to preferred stockholders was declared, and there has been no change in the number of shares of common stock outstanding during the year.

B. The dividend to preferred stockholders was not declared, and 10,000 shares of common treasury stock were held throughout the year. The preferred stock is cumulative.

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...ed stock = $100
Number of preferred stockholders = Value of preferred stock/par value
= 500,000/100 =5,000
Dividend on one stock = 8% of par value = 8/100*100 = $8
Dividend on 5,000 shares = $8*5,000 = $40,000
Now net income left for common stockholders = Net Income-Preferred dividend = 1,000,000 - 40,000 = $ 960,000.

The number of ...