Fitzgerald Ltd had the following capital structure on 1 July 2019: Number of ordinary shares Number of 10% preference shares 5 000 000 100 000 During the year ended 30 June 2020, the company made net profit after tax of $400 000

Accounting Aug 19, 2020

Fitzgerald Ltd had the following capital structure on 1 July 2019:
Number of ordinary shares Number of 10% preference shares
5 000 000 100 000
During the year ended 30 June 2020, the company made net profit after tax of $400 000. Preference share dividends of $10 000 were paid during the year. The preference dividends were not treated as part of interest expense. No further shares were issued during the year ending 30 June 2020.

Calculate the basic earnings per share of Fitzgerald Ltd for the year ending 30 June 2020.

Expert Solution

Computation of the basic earnings per share:-

Basic earnings per share = (Net income - Preference dividend)/ Number of shares

= ($400,000 - $10,000) / 5000,000

= $390,000 / 5000,000

= $0.08 per share

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