Question

Information from the financial statements of Ames Fabricators, Inc., included the following:    December 31 2021...

Information from the financial statements of Ames Fabricators, Inc., included the following:
  

December 31
2021 2020
Common shares 100,000 100,000
Convertible preferred shares (convertible into 80,000 shares of common) 31,200 31,200
8% convertible bonds (convertible into 30,000 shares of common) $ 1,000,000 $ 1,000,000


Ames’s net income for the year ended December 31, 2021, is $820,000. The income tax rate is 25%. Ames paid dividends of $5 per share on its preferred stock during 2021.

Required:

Compute basic and diluted earnings per share for the year ended December 31, 2021. (Enter your answers in thousands. Do not round intermediate calculations.)

Numerator / Denominator = Earnings per Share
Basic $438,000 / 100,000 = $6.64
Diluted $648,000 / 210,000 = $3.09

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Answer #1

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