Question

On June 1, 2018, Blue Company and Kingbird Company merged to form Oriole Inc. A total of 837,000 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 576,000 shares of stock for cash. All 1,413,000 shares were outstanding on December 31, 2020.

Oriole Inc. also issued $600,000 of 20-year, 7% convertible bonds at par on July 1, 2020. Each $1,000 bond converts to 36 shares of common at any interest date. None of the bonds have been converted to date.

Oriole 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 $1,395,000. (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 1

a1)
Number of shares for Basic Earnings per share:
Date	Shares	Weight	Weighted-shares
Jan 1-Apr1	837000	3/12	209250
Apr1-Dec 31	1413000	9/12	1059750
			1269000
a2)
Number of shares for Diluted Earnings per share:
Date	Shares	Weight	Weighted-shares
Jan 1-Apr1	837000	3/12	209250
Apr1-Jul1	1413000	3/12	353250
Jul1-Dec31	1434600	6/12	717300	(600000/1000*36) = 21600 shares if converted
			1279800

B) (1)

Earnings figures to be used for calculating Basic earnings per share
Net income	1395000

(2) Earnings figures to be used for calculating Diluted earnings per share

Net income	1395000
Interest savings net of tax	16800	=(600000*7%*1/2)*(1-0.2)
Adjusted income	1411800