Question

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 bonds sold originally at face value. Reported net income for 2018 was $270,000 with a 40% tax rate. Common shareholders received $1.70 per share dividends after preferred dividends were paid in 2018. Required: Compute basic and diluted earnings per share for 2018. (Round your answers to 2 decimal places.)

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Basic Earnings per Share = Earnings available for Equity Shareholders/Weighted average of equity shares outstanding during the year]

= 99760/111,250 = $0.90

Diluted Earnings per Share = 270000(1-.4)/(100000+45000+8500*3+470*30)

= 162000/184600 = $0.88

Earnings available for Equity

Net Income = 270,000

Less: Interest on Bonds = 32,900

EBT = 237,100

Less: Tax@40% 94,840

EAT 142,260

Less: Preference Dividend = 42,500

Earnings for Equity = 99,760

Weighted Average Number of Equity Shares:

Outstanding on Jan 1 = 100,000

Sold for Cash 45000*3/12 = 11,250

Weighted Average of Equity Shares outstanding = 111,250

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, 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...
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...
Swifty Corporation had 190000 shares of common stock, 19600 shares of convertible preferred stock, and $1430000...
Swifty Corporation had 190000 shares of common stock, 19600 shares of convertible preferred stock, and $1430000 of 5% convertible bonds outstanding during 2018. The preferred stock is convertible into 39500 shares of common stock. During 2015, Swifty paid dividends of $0.90 per share on the common stock and $3 per share on the preferred stock. Each $1,000 bond is convertible into 30 shares of common stock. The net income for 2018 was $602000 and the income tax rate was 35%....
1. Windsor Corporation had 318,000 shares of common stock outstanding on January 1, 2017. On May...
1. Windsor Corporation had 318,000 shares of common stock outstanding on January 1, 2017. On May 1, Windsor issued 31,500 shares. (a) Compute the weighted-average number of shares outstanding if the 31,500 shares were issued for cash. Weighted-average number of shares outstanding $ (b) Compute the weighted-average number of shares outstanding if the 31,500 shares were issued in a stock dividend. Weighted-average number of shares outstanding $ 2. Sarasota Corporation reported net income of $230,000 in 2017 and had 47,700...
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, 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...
Hutchins Company had​ 200,000 shares of common​ stock, 50,000 shares of convertible preferred​ stock, and​ $2,000,000...
Hutchins Company had​ 200,000 shares of common​ stock, 50,000 shares of convertible preferred​ stock, and​ $2,000,000 of​ 10% convertible bonds outstanding during the entire year. The preferred stock was convertible into​ 40,000 shares of common stock. During the current​ year, Hutchins paid dividends of​ $1.00 per share on the common stock and​ $2.00 per share on the preferred stock. Each​ $1,000 bond was convertible into 50 shares of common stock. The net income for the year was​ $1,000,000, and the...
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...
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.)...
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...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT