Question

On December 31, 2017, Berclair Inc. had 340 million shares of common stock and 6 million shares of 9%, $100 par value cumulative preferred stock issued and outstanding. On March 1, 2018, Berclair purchased 24 million shares of its common stock as treasury stock. Berclair issued a 5% common stock dividend on July 1, 2018. Four million treasury shares were sold on October 1. Net income for the year ended December 31, 2018, was $400 million. The income tax rate is 40%. Also outstanding at December 31 were incentive stock options granted to key executives on September 13, 2013. The options are exercisable as of September 13, 2017, for 30 million common shares at an exercise price of $56 per share. During 2018, the market price of the common shares averaged $70 per share. In 2014, $62.5 million of 8% bonds, convertible into 6 million common shares, were issued at face value. Required: Compute Berclair's basic and diluted earnings per share for the year ended December 31, 2018. (Enter your answers in millions (i.e., 10,000,000 should be entered as 10).) Numerator 1 Denominator = Earnings per Share Basic EPS Diluted EPS

Answer 1

Answer Page. No D diwed couldings ww wv 1 encled dec 31, 2018 U wa Basic EPS Basic EPS EL Net income for common stock weighted average number of outefanding commenstocks Net income for common sfock - $400 million --G million eshanes ] X$100X97) = $400 million $54 million < $ 346 million On Jan 1, 2018 weighted ang no.gf common stock =340 million shares X1.05 .. Jan to march a months C1054.1:05) 59.5 million shoes = On Mar 1, 2018, @cighted ang no. of common stock = (340– 24)milion shares X 1006x con te = 316 X1.05X ☺ 4 months

= 110.6 million shares Page. No On July 1, 2018, weighted ang no.of common stock = (3161.05 )common shares x 1 1 X3 Furuly, tootti) 2 ( 3 months = 33118X1 X 3 - 82.95 million shares T2 ( 3months) On acf 1,2018, weighted ang no.of common stock - (331.8+4 ) million shares x I x 3 octi todell = 335.8 XIX - 83.95 million shares Total = ( 59.5 + 110:6 +82.95 483.95) million shares = 337 millico shares $346 millions 337 million shares - = 1.03 Basic EPS - 1.'. Basic carnings por share = $1.03

Page.no Diluted EPS olubd neb income toy common stoc ($69.5 X 8 4. x 60 = $346 million + $ 3 million (2 4-) = $ 349 million Weighted average common stock out standing = 337 milion shares Convertible bonds = 6 million shares e zocioable stock option - 3o milion shares – (2006 ) iliom = ( 80 – 24) million shares : - Gmillion shares shares :. eighted ang no.of comenon stock including dilutive = 334 +6+6 = 349 million shares 9 million 2 3 ilued EPS E- = =$1 349 million shares . Diluted earnings per share = $ 1 per share