Question

On January 1, 2018, United Airlines had 13,000 shares of common stock outstanding and 5,000 shares...

On January 1, 2018, United Airlines had 13,000 shares of common stock outstanding and 5,000 shares of 6% $100 par, cumulative preferred stock outstanding. It also had stock options giving key personnel the option to buy 7,000 common shares at $30 each. Net income for 2018 was 41,000. Tax rate 40%. The average market price during 2018 was $40 per common share.

Compute the basic EPS for 2018 for United Airlines corp.

.65

.79

.85

1.77

Compute the diluted EPS for 2018 United Airlines orp.

2.78

1.83

4.81

.75

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Solution 1:

Basic EPS = Earning for common shareholders / Weighted average outstanding shares

Earning for common shareholders = Net Income - Preferred dividend = $41,000 - ($500,000 * 6%) = $11,000

Basic EPS = $11,000 / 13000 = $0.85 per share

Hence 3rd option is correct.

Solution 2:

Computation of Diluted EPS:

Amount to be paid for stock option = 7000*30 = $210,000

Value of option in current shares = Amount paid to exercise option / Current market price = $210,000 / 40 = 5250 shares

Diluted shares = Option issued - Value of option in current shares= 7000 - 5250 = 1750 shares

Diluted EPS = Earning for common shareholders / (Outstanding shares + Diluted shares)

= $11000 / (13000 + 1750) = $0.75

Hence last option is correct.

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
On December 31, 2017, Jackson Company had 100,000 shares of common stock outstanding and 30,000 shares...
On December 31, 2017, Jackson Company had 100,000 shares of common stock outstanding and 30,000 shares of 7%, $50 par, cumulative preferred stock outstanding. On February 28, 2018, Jackson purchased 24,000 shares of common stock on the open market as treasury stock paying $45 per share. Jackson sold 6,000 of the treasury shares on September 30, 2018, for $47 per share. Net income for 2018 was $180,905. Also outstanding at December 31, 2017, were fully vested incentive stock options giving...
On December 31, 2017, Jackson Company had 100,000 shares of common stock outstanding and 34,000 shares...
On December 31, 2017, Jackson Company had 100,000 shares of common stock outstanding and 34,000 shares of 5%, $50 par, cumulative preferred stock outstanding. On February 28, 2018, Jackson purchased 28,000 shares of common stock on the open market as treasury stock for $39 per share. Jackson sold 6,400 treasury shares on September 30, 2018, for $41 per share. Net income for 2018 was $184,905. Also outstanding during the year were fully vested incentive stock options giving key personnel the...
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...
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...
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...
Monsieur Company had 80,000 shares of common stock outstanding during 2020 and 2,000 shares of cumulative...
Monsieur Company had 80,000 shares of common stock outstanding during 2020 and 2,000 shares of cumulative 6%, $100 par preferred stock, each convertible into 5 shares of common stock with  $1 par value per share. The company’s tax rate is 25%. During 2020, Monsieur Company declared and paid $5,000 in preferred dividends and no common stock dividends. Monsieur Company reported net income of $318,000 in 2020. Compute basic and diluted EPS for 2020.                Basic EPS     Diluted EPS   $3.83             $3.40    $3.91            $3.53...
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...
On December 31, 2020, Jackson Company had 100,000 shares of common stock outstanding and 28,000 shares...
On December 31, 2020, Jackson Company had 100,000 shares of common stock outstanding and 28,000 shares of 6%, $50 par, cumulative preferred stock outstanding. On February 28, 2021, Jackson purchased 22,000 shares of common stock on the open market as treasury stock for $33 per share. Jackson sold 5,800 treasury shares on September 30, 2021, for $35 per share. Net income for 2021 was $178,905. Also outstanding during the year were fully vested incentive stock options giving key executives the...
On December 31, 2020, Jackson Company had 100,000 shares of common stock outstanding and 36,000 shares...
On December 31, 2020, Jackson Company had 100,000 shares of common stock outstanding and 36,000 shares of 5%, $50 par, cumulative preferred stock outstanding. On February 28, 2021, Jackson purchased 30,000 shares of common stock on the open market as treasury stock for $41 per share. Jackson sold 6,600 treasury shares on September 30, 2021, for $43 per share. Net income for 2021 was $186,905. Also outstanding during the year were fully vested incentive stock options giving key executives the...
Ahnberg Corporation had 560,000 shares of common stock issued and outstanding at January 1. No common...
Ahnberg Corporation had 560,000 shares of common stock issued and outstanding at January 1. No common shares were issued during the year, but on January 1, Ahnberg issued 180,000 shares of convertible preferred stock. The preferred shares are convertible into 360,000 shares of common stock. During the year Ahnberg paid $108,000 cash dividends on the preferred stock. Net income was $1,060,000. What were Ahnberg's basic and diluted earnings per share for the year? (Round your answers to 2 decimal places.)...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT