Exercise 16-23
On June 1, 2018, Crane Company and Cheyenne Company merged to
form Ayayai Inc. A total of 870,000 shares were issued to complete
the merger. The new corporation reports on a calendar-year
basis.
On April 1, 2020, the company issued an additional 543,000 shares
of stock for cash. All 1,413,000 shares were outstanding on
December 31, 2020.
Ayayai Inc. also issued $600,000 of 20-year, 8% convertible bonds
at par on July 1, 2020. Each $1,000 bond converts to 38 shares of
common at any interest date. None of the bonds have been converted
to date.
Ayayai Inc. is preparing its annual report for the fiscal year
ending December 31, 2020. The annual report will show earnings per
share figures based upon a reported after-tax net income of
$1,613,000. (The tax rate is 20%.)
Determine the following for 2020.
(a) The number of shares to be used for
calculating: (Round answers to 0 decimal places, e.g.
$2,500.)
(1) |
Basic earnings per share |
enter a number of shares rounded to 0 decimal places | shares | |||
---|---|---|---|---|---|---|
(2) |
Diluted earnings per share |
enter a number of shares rounded to 0 decimal places | shares |
(b) The earnings figures to be used for
calculating: (Round answers to 0 decimal places, e.g.
$2,500.)
(1) |
Basic earnings per share |
$enter a dollar amount rounded to 0 decimal places | ||
---|---|---|---|---|
(2) |
Diluted earnings per share |
$enter a dollar amount rounded to 0 decimal places |
Answer:
(a)Calculation of number of shares to be used for calculating
(1) Basic earnings per share = (870000*3/12) + (1413000*9/12)
= 1277250
(2) Diluted earnings per share = (870000*3/12) +(1413000*3/12) +(1435800*6/12)
= 1288650
(b) Calculation of earnings figures to be used for
(1) Calculation of Basic earnings per share = Net income after tax
= $1613000
(2) Calculation of Diluted earnings per share = net income + interest expense after tax adjustment
= $1613000+$19200
= $1632200.
Exercise 16-23 On June 1, 2018, Crane Company and Cheyenne Company merged to form Ayayai Inc....
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