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On Jan 1, 2018, Zibeon, Inc. had 8,400,000 shares of Class A common stock outstanding. On...

On Jan 1, 2018, Zibeon, Inc. had 8,400,000 shares of Class A common stock outstanding. On August 1, 2018, the company purchased 560,000 treasury shares. The board declared a 3-for-1 stock split on Oct 1, 2018. The only potentially dilutive security was $20,000,000 of 6.2% debentures, each with a face value of $1,000. The debentures had been issued in 2014 and were convertible into 20 shares of common stock. The company’s 2018 net income was $24,660,000. The tax rate was 30%. Calculate basic and fully diluted eps.

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Answer #1
Date of Shares Fr-action We-ighted
Particulars Out-standing Out-standing Re-statement of Year Shares
Initial Balance Jan. 1–Aug. 1 8,400,000 3 7/12 14,700,000
Treasury shares Aug. 1–Oct. 1 7,840,000 3 2/12 3,920,000
Stock split 3 for 1 Oct. 1–Dec. 31 23,520,000 3/12 5,880,000
Weighte average NO of shares O/S 24,500,000
(a) Basic EPS = $24,660,000 (Net Income) $       1.01
24,500,000 (Weighte average NO of shares O/S)
(b) Diluted EPS = $24,660,000 + (1-0.3)(20,000,000 x 6.2%)
24,500,000 + (20,000 x 3 x 20)
Diluted EPS = $25,528,000 $            0.99
25700000

Debentures are restated for stock split

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