Ricci Corporation is preparing their financial statements for the year ending September 30, 2021. Ricci Corporation has two categories of stock; Preferred and Common. On September 25, 2021 Ricci Corporation declared dividends on the preferred stock which will be paid on October 18, 2021. In order to calculate EPS the
Ricci Corporation is preparing their financial statements for the year ending September 30, 2021. Ricci Corporation has two categories of stock; Preferred and Common. On September 25, 2021 Ricci Corporation declared dividends on the preferred stock which will be paid on October 18, 2021. In order to calculate EPS the staff accountant had the following information:
2021 Net Income: $4,000,000
Preferred Dividends Declared in September 25, 2021 $ 500,000
but not paid until October 18, 2021
Weighted Average Number of Common Shares Outstanding 125,000 shares
The staff accountant has determined that since the preferred dividends were not paid prior to September 30, 2021 the preferred dividend should not be included in the 2021 EPS.
Accounting Issue: In the calculation for EPS should Ricci Corporation include the preferred dividends not paid prior to September 30, 2021?
Your Interpretation of the Guidance: Should Ricci Corporation include the preferred dividends in the calculation of EPS for the year ending September 30, 2021?
a. Yes, include the preferred dividends in the calculation of EPS
b. No, do not include the preferred dividends in the calculation of EPS.
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