Question

Paul Company had 100,000 shares of common stock outstanding on January 1, 2018. On September 30, 2018, Paul sold 48,000 shares of common stock for cash. Paul also had 10,000 shares of convertible preferred stock outstanding throughout 2018. The preferred stock is $100 par, 6%, and is convertible into 3 shares of common for each share of preferred. Paul also had 500, 8%, convertible bonds outstanding throughout 2018. Each $1,000 bond is convertible into 30 shares of common stock. The bonds sold originally at face value. Reported net income for 2018 was $300,000 with a 40% tax rate. Common shareholders received $2 per share dividends after preferred dividends were paid in 2018.

Required: Compute basic and diluted earnings per share for 2018. (Round your answers to 2 decimal places.)

Answer 1

- $ 3,00,000 adpusted net income Net income reported A Interest after tan (500X1000X80X00 B 24000 & 324ooo 72 12 Total number of shares = /1,00,000 X 12 + 48000 X3 + (10.C.OY3)x13 +(500x 30) x 121 z 157000 shares Diluted Eps = $324000 - $2.06 157000 shares

I competation of basic and dikoted earrang I per share Basic eps = Net Income available to common stockholders - weighted average number of shares. a I Net income reported - dividend paid to - preferred stockholders [ 10,000 $100x 6.1.7 $ 3,00,000 $ (60,000) & 2,40,000 Basic Eps a $2,40,000 = $2014 (12000 average number of Note : weighted Shares = 1,00,000x12 + 48000x3/12 - 112000 shares.