Reference no: EM132889824

Problem - Earnings per Share Disclosure Extreme Company reported the following information about its stock on its December 31, 2019, balance sheet:

Preferred stock, $2 par value, 5% cumulative, 300,000 shares authorized, 120,000 shares issued and outstanding $240,000

Common stock, $1 par value, 500,000 shares authorized, 240,000 shares issued and outstanding 240,000

The following amounts were taken from Extreme's income statement:

Income from continuing operations before income taxes $ 680,000

Income tax expense (204,000)

Income from continuing operations $ 476,000

Loss from discontinued operations, net of $13,000 tax benefit (36,000)

Net income $ 440,000

Required -

Calculate all earnings per share amounts for 2019.

Are dividends on preferred stock taken into account when calculating earnings per share even if they are not declared? If so, why?