Titanic Inc Reported Net Income of 650k for the yearl. Titanic did not pay any dividends last year but paid dividents of 200,000 to the preferred stock (includes dividends in arrears) and 50,000 to the common stock in the current year. The number of outstanding shares throughout the year was as follows: Common stock, $1 par, 100,000 10% Prefered Stock, $100 par, cumulative 10,000 Basic EPS is: a) 4.00 b) 4.50 c) 5.00 d) 5.50 The correct answer is D, with the calculation (650,000-100,000) / 100,000 my question is, why would you use 10,000 * .1 * $100 (the calculation of prefered dividend) instead of the 200,000 which they gave you in the problem??
THe $200000 is from arrears… They were supposed to be paid the last yr. It is not included in this yrs EPS calculation.
excellent thank you