Question

During 2021, Quattro entered into the following transactions relating to shareholders' equity. The corporation was authorized to issue 20 million common shares, $1 par per share.

Net income for 2021 was $110 million.

Jan.		2:		Issued 10 million common shares for cash.
Jan.		3:		Entered an agreement with the company president to issue up to 2 million additional shares of common stock in 2021 based on the earnings of Quattro in 2021. If net income exceeds $100 million, the president will receive 1 million shares; if net income exceeds $120 million, the president will receive 2 million shares.

Required:
Compute basic and diluted EPS for 2021.

Answer 1

Basic Earning per share is net income / outstanding equity shares

Diluted earning per share is net income / outstanding equity shares + potential equity shares.

Net income for 2021 is 110 million $

Outstanding shares issued on Jan 2 is 10 million

On Jan 3 entered contract for issue of potential shares depending on the profits.

As net income exceeds 100 million but less than 120 million potential shares will be 1 million.

Basic EPS is 110/10 equals 11 per share that is for every share 11$ per share is earned.

Diluted EPS is 110/11 equal 10 per share

Pls like if logic explained