Question

McNamara Ltd provides the following information for 2012:

1.   Net Income [including an extraordinary gain (net of tax) of $160,000]        $520,000

2.   Capital Structure

(a) Cumulative $8, preferred shares, no par,
6,000 shares issued and outstanding                                                                                  $600,000

(b) Common shares, 76,000 shares outstanding on January 1.
On April 1, 40,000 shares were issued for cash.
On October 1, 16,000 shares were purchased and retired.                                                 $1,000,000

(c) On January 2, 2012, McNamara purchased O’Donnell Corporation.
One of the terms of the purchase was that if McNamara's net income for 2013 is $500,000 or more, 50,000 additional common shares would be issued to O’Donnell shareholders.

3.   Other Information

(a) Average market price of the common shares during 2012                                                             $30

(b) Income tax rate                                                                                                                         30%

Required

Calculate basic and diluted earnings per share for 2012.

Show all supporting calculations.

     

Answer 1