On December 31, 2017, Berclair Inc. had 600 million shares of common stock and 1

Question

On December 31, 2017, Berclair Inc. had 600 million shares of common stock and 16 million shares of 9%, $100 par value cumulative preferred stock issued and outstanding. On March 1, 2018, Berclair purchased 30 million shares of its common stock as treasury stock Berclair issued a 4% common stock dividend on July 1, 2018. Four million treasury shares were sold on October 1. Net income for the year ended December 31, 2018, was $800 million. Also outstanding at December 31 were 63 million incentive stock options granted to key executives on September 13, 2013. The options were exercisable as of September 13, 2017, for 63 million common shares at an exercise price of $60 per share. During 2018 the market price of the common shares averaged $70 per share The options were exercised on September 1, 2018 Required Compute Berclair's basic and diluted earnings per share for the year ended December 31, 2018. (Enter your answers in millions (i.e., 10,000,000 should be entered as 10).) Answer is not complete arnings per Numerator 11 Denominator Share Basic EPS Diluted EPS

Explanation / Answer

Millions Millions Dec 31 2017 Common Stock 600 Net Income 800 9% Preference Stock 16 Less Pref Div 144 March 1 2018 Treasury Stock 30 $1600*9% July 1 2018 Common Stock Dividend 22.8 Earnings avaialble to equity shareholders 656 570*4% Oct-18 Sale of treasury 4 Weighted Average no of Shares Dec-13 Stock Option 63 (600+22.8)*2/12 103.8 (622.8-30)*6/12 296.4 (592.8+63)*1/12 54.65 Dilutive effect of Stock options (655.8+4)*3/12 164.95 619.8 No of shares issued under stock option 63 Stock dividend is declared from retained earnings it is to be treasted MV 70 /share as existing in the last yr itself Exercise Price $60/share Actual No of shares available at market value 63*$60/$70 Basic EPS 656/619.8 1.06 54 Diluted Shares 54 Weighted No of shares considring dilution in stock 619.8+54 673.8 Diluted EPS 656/673.8 0.97

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