Answer to Question #306390 in Accounting for Faith

Question

Flame Holdings is a company with a called up and paid up capital of 100,000 ordinary

shares of £1 each and 20,000 10% redeemable preference shares of £1 each.

The gross profit was £200,000 and trading expenses were £50,000. Flame Holdings

paid the required preference share dividend and an ordinary dividend of £ 0.42 per

share. The tax charge for the year was estimated at £40,000.

Required

Calculate basic EPS for the year

Answer 1

$Basic EPS = \frac{(Net income - preferred dividends)}{ weighted average of common shares outstanding during the period}$

Net income=200 000-50 000-40 000=110 000

$preferred dividends=20 000\times0.42=8400$

$Basic EPS = \frac{(110 000- 8400)}{100000}=1.016$

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