Question

Presented below is information related to the Andrews Company for 2018. Use this information to compute basic and diluted EPS for 2018 Net Income was $780,000 Tax rate was 30% Average market price of common stock was S30 Capital Structure: * Cumulative 10% preferred stock, $100 par, 500 shares issued and outstanding. Preferred stock can be converted into common stock at a ratio of 4 shares of common for one share of preferred. .$10 par common stock, 66,000 shares outstanding on January 1. On April 1, 20,000 shares were issued for cash. On October 31, 9,000 shares were purchased and held as treasury stock Stock options outstanding to buy 16,000 shares of common stock at S20 per share

Answer 1

Date	Particulars	No of Share	Cumulative	Period	Ratio (period/12)	Average number of outstanding shares (Final*Ratio)
Jan 1, 2018	Beginning	66000	66000	3	0.25	16500
Apr 1, 2018	Issue	20000	86000	6	0.5	43000
Oct 1, 2018	Purchase	-9000	77000	3	0.25	19250
				12		78750
Net Income		780000
Less: Preferred Dividend	50000*10%	-5000
Income available for common stock holder		775000
Basic EPS=(Net Income-Preferred Dividend)/Average no of outstanding shares
Basic EPS=	775000/78750	9.84
Additional No of Shares:
Preferred Share	500*4	2000
Stock Options:
Proceeds from Issue (16000*20)	320000
Shares based on Average Market Price 320000/30	10667
No. of share from Options	16000-10667	5333
Additional No of shares		7333
Diluted EPS	2854000/(1035000+250000 additional share)
Diluted EPS	9.06