Question

The following information was obtained from Cyber Corporation's annual report.

Common stock: shares outstanding
Balance on January 1	500,000
April 1 - issued in conversion of preferred stock	200,000
July 1 - sold for cash	100,000
Balance on December 31	800,000

Preferred stock: shares outstanding
$10 par 8%, each convertible into two common shares
Shares outstanding, January 1	175,000
Converted on April 1 (into 200,000 common)	100,000
Shares outstanding at year-end	75,000

Options
100,000 options each to purchase one common share at $80 per share. None have been exercised.

Additional Information

	Average for Year	End of Year
Market prices of common stock for Year	$84	$86
Preferred dividends paid in year	$80,000
Net Income	$1,200,000

[A] Compute weighted-average number of common shares outstanding for the year.

[B] Compute basic EPS.

[C] Compute diluted EPS.

Answer 1

A)

Given,
Shares			No. of Months		Shares		Weighted Average shares
Balance on January 1			12 months		500000		500000
April 1 issued			9 months		200000		150000
July 1 Sold for cash			6 months		100000		50000
Total							700000
B)
	Basic EPS			Net income/ Total Weighted Average shares
			=	12,00,000
				7,00,000
			=	1.71	EPS