On December 31, 2017, Brisbane Company had 100,000 shares of common stock outstanding and 35,000 shares of 6%, $50 par, cumulative preferred stock outstanding. On February 28, 2018, Brisbane purchased 29,000 shares of common stock on the open market as treasury stock paying $45 per share. Brisbane sold 6,500 treasury shares on September 30, 2018, for $50 per share. Net income for 2018 was $185,905. Also outstanding during the year were fully vested incentive stock options giving key personnel the option to buy 55,000 common shares at $45. The market price of the common shares averaged $55 during 2018.
Required: Compute Brisbane's basic and diluted earnings per share for 2018. (Round your answers to 2 decimal places.)
Answer:
EPS = (Net income – Preferred dividends) / Weighted Average common shares outstanding |
Basic EPS = [$185905 - (6% x $50 x 35,000)]/[100,000 - (29,000 x 10/12) + (6,500 x 3/12)] |
...................= [$179,905 - $105,000] / [100,000 - 24,167 + 1,625] |
...................= $80,905 / 77458 |
...................= $1.0445 i.e 1.04 |
Diluted EPS = [$185,905 - (6% x $50 x 35,000)]/[100,000 - (29,000 x 10/12) + (6500 x 3/12) +(55,000 - 45,000*)] |
.....................= [$179,905 - $87,000] / [100,000 - 24,167 + 1,625 + 10,000] |
.....................= $80,905 / 87,458 |
.....................= $0.9251 i.e $0.93 |
On December 31, 2017, Brisbane Company had 100,000 shares of common stock outstanding and 35,000 shares...
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