Question

Abby Company had 150,000 shares of common stock outstanding on January 1, 2018. On September 30,...

Abby Company had 150,000 shares of common stock outstanding on January 1, 2018. On September 30, 2018, Abby sold 30,000 shares of common stock for cash. Abby also had 100, 8%, convertible bonds outstanding throughout 2018. Each $1,000 bond is convertible into 20 shares of common stock. The bonds sold originally at face value. The company also had 10,000 executive stock options outstanding that allowed executives to purchase shares of stock for $11.00. The average share price for the year was $9.50. Reported net income for 2018 was $500,000 with a 40% tax rate. Common shareholders receive $2.50 per share dividends in 2018.

Compute basic and diluted earnings per share (rounded to 2 decimal places) for 2018.

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1
ans Basic EPS in $
Net Income/weighted average common stock outstanding
500000/((150000*12/12)+(30000*3/12)) 3.17 answer
Diluted earnings per share
Net Income+after tax interest/ weighted share+potention shares
(500000+4800)/((150000*12/12)+(30000*3/12)+2000) 3.16 answer
Potential shares
Convertible bonds into share
100*20 2000
Stock options
It is anti dilutive as market price is less than the purchase price
of stock
Interest after tax 4800
100*1000*8%*(1-.4)
If any doubt please comment.
0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Paul Company had 100,000 shares of common stock outstanding on January 1, 2018. On September 30,...
Paul Company had 100,000 shares of common stock outstanding on January 1, 2018. On September 30, 2018, Paul sold 45,000 shares of common stock for cash. Paul also had 8,500 shares of convertible preferred stock outstanding throughout 2018. The preferred stock is $100 par, 5%, and is convertible into 3 shares of common for each share of preferred. Paul also had 470, 7%, convertible bonds outstanding throughout 2018. Each $1,000 bond is convertible into 30 shares of common stock. The...
Paul Company had 100,000 shares of common stock outstanding on January 1, 2021. On September 30,...
Paul Company had 100,000 shares of common stock outstanding on January 1, 2021. On September 30, 2021, Paul sold 58,000 shares of common stock for cash. Paul also had 15,000 shares of convertible preferred stock outstanding throughout 2021. The preferred stock is $100 par, 7%, and is convertible into 3 shares of common for each share of preferred. Paul also had 600, 9%, convertible bonds outstanding throughout 2021. Each $1,000 bond is convertible into 30 shares of common stock. The...
A company earned net income of $1,500,000 in 2019 and had 150,000 shares of common stock...
A company earned net income of $1,500,000 in 2019 and had 150,000 shares of common stock outstanding on January 1, 2019. The tax rate is 20% and the common stock sold at an average market price of $24 per share during the period. The company had the following transactions affecting common shares outstanding during the year: • Issued 50,000 shares of common stock on March 1, 2019 • Repurchased 5,000 shares of common stock on June 1, 2019 • Had...
At December 31, 2017, Zeus Company had 800,000 shares of common stock outstanding. On October 1,...
At December 31, 2017, Zeus Company had 800,000 shares of common stock outstanding. On October 1, 2018, an additional 160,000 shares of common stock were issued. In addition, Zeus had $10,000,000 of 5% convertible bonds outstanding at December 31, 2017, which are convertible into 360,000 shares of common stock. No bonds were converted into common stock in 2018. The net income for the year ended December 31, 2018, was $2,500,000. Assuming the income tax rate was 30%, the diluted earnings...
At December 31, 2018, Galatia Inc. had 250,000 shares of common stock outstanding. On October 1,...
At December 31, 2018, Galatia Inc. had 250,000 shares of common stock outstanding. On October 1, 2019, an additional 60,000 shares of common stock were issued for cash. Galatia also had $2,000,000 of 10% convertible bonds outstanding at December 31, 2019, which are convertible into 50,000 shares of common stock. The bonds are dilutive in the 2019 earnings per share computation. No bonds were issued or converted into common stock during 2019. What is the number of shares that should...
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...
On December 31, 2011, JME Corporation had 350,000 shares of common stock outstanding. On September 1,...
On December 31, 2011, JME Corporation had 350,000 shares of common stock outstanding. On September 1, 2012, an additional 150,000 shares of common stock were issued. In addition, JME had $10 million of 8% convertible bonds outstanding at December 31, 2011, which are convertible into 200,000 shares of common stock. Net income for 2012 was $3 million. Assuming an income tax rate of 40%, what amount should be reported as the diluted earnings per share for 2012?
On January 1, 2018, Tonge Industries had outstanding 680,000 common shares ($1 par) that originally sold...
On January 1, 2018, Tonge Industries had outstanding 680,000 common shares ($1 par) that originally sold for $20 per share, and 4,000 shares of 10% cumulative preferred stock ($100 par), convertible into 40,000 common shares. On October 1, 2018, Tonge sold and issued an additional 20,000 shares of common stock at $35. At December 31, 2018, there were 21,000 incentive stock options outstanding, issued in 2017, and exercisable after one year for 21,000 shares of common stock at an exercise...
At December 31, 2016, Morrison Company had 700 shares of common stock outstanding. On September 1,...
At December 31, 2016, Morrison Company had 700 shares of common stock outstanding. On September 1, 2017, an additional 300 shares of common stock were issued. In addition, Morrison had $20,000 of 8 percent convertible bonds outstanding at December 31, 2016, which are convertible into 400 shares of common stock. No bonds were converted into common stock in 2017. Net income for the year ended December 31, 2017, was $6,000. Assuming an income tax rate of 50 percent what would...
Penn Company had 10,000,000 shares of common stock outstanding on January 1, 2018. Penn entered into...
Penn Company had 10,000,000 shares of common stock outstanding on January 1, 2018. Penn entered into the following stock transactions during 2018: • 2,000,000 shares of common stock were issued on April 1st. • 600,000 shares of common stock were purchased on May 1st and were being held as treasury stock. • 500,000 shares of preferred stock were issued on July 1st. • 400,000 shares of treasury stock were reissued on October 1st. • A 2-for-1 common stock split was...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT