Philagem, Inc., ended 2012 with a net profit before taxes of $218,000. The company is subject to

Question:

Philagem, Inc., ended 2012 with a net profit before taxes of $218,000. The company is subject to a 40% tax rate and must pay $32,000 in preferred stock dividends before distributing any earnings on the 85,000 shares of common stock currently outstanding.

a. Calculate Philagem’s 2012 earnings per share (EPS).

b. If the firm paid common stock dividends of $0.80 per share, how many dollars would go to retained earnings?

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on...