Information from the financial statements of Ames Fabricators, Inc., included the following: December 31 2021 2020...

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Information from the financial statements of Ames Fabricators, Inc., included the following: December 31 2021 2020 Common sha

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Calculation of Basic Earnings Per Share

Net Income	$ 8,00,000
Less: Preference dividend (30000*5)	$ -1,50,000
Earnings available to equity shareholders	$ 6,50,000
Divided by number of common stock outstanding	100,000 shares
Basic Earnings Per Share	$6.5

Calculation of diluted earnings per share

Potential Income = Net Income (given) + Income from debenture after tax = 800,000 + (1,000,000 × 10% × (1 - 0.25)
800,000 + 75,000
$ 875000
Potential number of common stock considering conversion = 100,000 common share + 78,000 convertible preffered shares + 30,000 convertible debenture
208,000 shares
Diluted Earnings Per Share = potential income / potential common shares = 875,000 / 208,000 shares = $4.206

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