Earnings per Share Disclosure Extreme Company reported the following information about its stock on its December 31, 2016, 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 $1 3,000 tax benefit .... (36,000)
Extraordinary gain, net of $25,000 tax ............ 80,000
Net income......................$ 520,000
The only stock issued during 2016 was 80,000 shares of common stock issued on June 30, 2016. No dividends were declared during 2016.
Required:
1. Calculate all earnings per share amounts for 2016.
2. Arc dividends on preferred stock taken into account when calculating earnings per share even if they are not declared? If so, why?