Question

During 2018, its first year of operations, McCollum Tool Works entered into the following transactions relating to shareholders’ equity. The corporation was authorized to issue 100 million common shares, $1 par per share. Jan. 2 Issued 35 million common shares for cash. 3 Entered an agreement with the company president to issue up to 2 million additional shares of common stock in 2019 based on the earnings of McCollum in 2019. If net income exceeds $140 million, the president will receive 1 million shares; 2 million shares if net income exceeds $150 million. Mar. 31 Issued 4 million shares in exchange for plant facilities. Net income for 2018 was $144 million. Required: Compute 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).

Answer 1

Answer with working is given below

Number Equivalent of Shares Shares Shares issued shares for plant exchange Total shares (in Mn) Full year 35 35 9 Months 3 38 Basic Earning per share Net Income ( In Million) $144 3.79 Equity shares 38 Diluted Earning per share Net Income (In Million) $144 3.69 Equity shares 39 Total shared for Diluted EPS Total Shares Shares to company President Total shares ( in Mn) 38 1 39