France Finding Earning Per Share

Jan 27, 2022
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Hi everyone,

I'm a first-year student and currently struggling with an EPS problem. I solved the problem but felt unsure of my answer. Below is the question and my attempt for finding the solution. Any help would be appreciated!

During 2016 Mongolfier Inc. earned $900,000 net income and paid its preferred dividends of $60,000. On January 1, 2016, the business had non-cumulative preferred shares and 200,000 common shares outstanding. On July 1, 2016 the business issued 80,000 shares and on October 1, 2016 it repurchased 100,000 shares.
Required: How much is the 2016 EPS?

Jan 1 (from Jan to June): 200,000 x 6/12 = 100,000
July 1 (from July to Sept): (200,000 + 80,000) x 3/12 = 70,000
Oct 1 (from Oct to Dec): (280,000 - 100,000) x3/12 = 45,000

EPS = (900,000 - 60,000)/100,000 + 70,000 + 45,000 = 3.91

My concern is the outstanding non-cumulative preferred share. A dividend omitted or not paid in any one year need not be paid in any future year. Since it is outstanding this year, it would be deducted?
Thank you

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