B is corrent. The requirement is to calculate basic earnings per share. Basic earnings per share is calculated by dividing earnings available to common shareholders by the weighted-average number of common shares outstanding. In this case, earnings available to common shareholders is equal to net income ($200,000) minus preferred dividends $16,000 (8,000 × $20 × 10%). Therefore, this answer is correct because basic earnings per share is equal to $7.36 [($200,000 – $16,000) ÷ $25,000].
A is incorrect. Basic earnings per share is calculated by dividing earnings available to common shareholders by the weighted-average number of common shares outstanding. In this case, earnings available to common shareholders is equal to net income ($200,000) minus preferred dividends $16,000 (8,000 × $20 × 10%). Therefore, basic earnings per share is equal to $7.36 [($200,000 – $16,000) ÷ $25,000].
C is incorrect. Basic earnings per share is calculated by dividing earnings available to common shareholders by the weighted-average number of common shares outstanding. In this case, earnings available to common shareholders is equal to net income ($200,000) minus preferred dividends $16,000 (8,000 × $20 × 10%). Therefore, this answer is correct because basic earnings per share is equal to $7.36 [($200,000 – $16,000) ÷ $25,000].
D is incorrect. Basic earnings per share is calculated by dividing earnings available to common shareholders by the weighted-average number of common shares outstanding. In this case, earnings available to common shareholders is equal to net income ($200,000) minus preferred dividends $16,000 (8,000 × $20 × 10%). Therefore, basic earnings per share is equal to $7.36 [($200,000 – $16,000) ÷ $25,000].
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