Question

On December 31, 2017, Berclair Inc. had 360 million shares of common stock and 12 million shares of 9%, $100 par value cumulative preferred stock issued and outstanding. On March 1, 2018, Berclair purchased 40 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 $600 million.

Also outstanding at December 31 were 60 million incentive stock options granted to key executives on September 13, 2013. The options were exercisable as of September 13, 2017, for 60 million common shares at an exercise price of $60 per share. During 2018, the market price of the common shares averaged $80 per share.

The options were exercised on September 1, 2018.

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 / Denominator = Earnings per Share Basic EPS / = Diluted EPS / =

Answer 1

6001 Net income LESS: Preferred Dividend (100*9%*12) Net income For EPS Calculation 108 492 Date weighted Average Number of Equity Shares December 31st 2017 Common stock 360 Million Shares March 1 st Treasuray Stock ( 40*10/12) -33 Million Shares July 1st 5% Stock Dividend (360-33)*5% 16 Million Shares Sep-02 options Excercised (60*4/12) 20 Millona Shares Oct 1st Treasuary Stock (493/12) 1 Million Shares Weighted Average Shares as on Dec 31st (For Basic) 364 Million Shares IF Stock options are Excersised Proceeds received = (60 Millions $60) 3600 Millions Buyback the Treasury stock = 3600/80 45 Million Shares Net increase in the Number of Shares (60-45)*8/12 10 Million Shares Weighted Average Stock (For Diluted EPS) 374 Million Shares

Earning Per share Numerator Denominator Weighted Average Net income # Shares 492 364 492/ 374 Earning Per share 1.35 Basic EPS Diluted EPS 1.32