Explore BrainMass

Explore BrainMass

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

    Not what you're looking for? Search our solutions OR ask your own Custom question.

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    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.

    © BrainMass Inc. brainmass.com March 6, 2023, 1:07 pm ad1c9bdddf

    Solution Preview

    First understand the concept. When dividend is declared for preferred stock we have to pay it first from the net income before we can pay the common share holders.

    If the preferred dividend is not declared, it gets accumulated (provided its CUMULATIVE preferred stock) for payment in some future date.

    (A) Now, the equations are as follows:

    Par value of ...

    Solution Summary

    The solution discloses all the calculations of EPS and dividends together with sufficient narrative to understand the concepts.