Question

Harris Pilton has 150,000 shares of common stock outstanding on January 1. On February 1, the...

Harris Pilton has 150,000 shares of common stock outstanding on January 1. On February 1, the company issued 50,000 additional shares for $50.00 each. On April 30, the company repurchased 5,000 treasury shares. On June 1, the company made a 4-for-3 bonus issue. On August 1, the company issued 1,000 new shares of common stock for $45.00 each. On September 30th, the company issued a 15% stock dividend. Harris Pilton has 2,000 shares of 5%, $10 par, noncumulative, nonconvertible preferred stock. Dividends were declared for the period. Harris Pilton also has in issue $100,000 of 7% convertible bonds due in 5 years. Each bond has a $1,000 par value and each $1,000 bond is convertible into 5 shares of common stock. Net income for the period is $540,000. The tax rate is 11%.

Instructions

  1. Compute the weighted average number of common shares outstanding.
  2. Compute basic earnings per share for the period.
  3. Compute diluted earnings per share for the period.
  4. If the nonconvertible preferred stock were instead convertible, briefly explain how this would have affected diluted earnings per share.
  5. If the noncumulative preferred stock were cumulative, briefly explain how this would have affected diluted earnings per share.

Computations:

Weighted average number of common shares:

Basic EPS:

Diluted EPS:

Requirement 4:

Requirement 5:

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