On January 1, 2013, Belk, Inc. had outstanding 440,000 common shares (par $1) th
ID: 2420645 • Letter: O
Question
On January 1, 2013, Belk, Inc. had outstanding 440,000 common shares (par $1) that originally sold for $20 per share, and 4,000 shares of 10% cumulative preferred stock (par $100), convertible into 40,000 common shares.
On October 1, 2013, Belk issued an additional 16,000 shares of common stock at $33. At December 31, 2013, there were common stock options outstanding, issued in 2012, and exercisable for 20,000 shares of common stock at an exercise price of $30. The market price of the common stock at year-end was $48. During the year the price of the common shares had averaged $40.
Net Income was $650,000. The tax rate for the year was 40%.
Compute basic and diluted EPS for the year ended December 31, 2013.
Explanation / Answer
Solution:
Caluculation of Earning Per Share:
Earning Per Share = $ 6,50,000 - 40,000 / 4,40,000
= $ 1.386
(A). Prefered Dividend:
4,000 Common Shares
Each Par Value = $ 100
= 4,000 * 100 = 4,00,000
= 4,00,000 * 0.10 %
= 40,000 Dividend
Earning Per Share = Net Income - Prefered Dividend / Weigheted AVg Common Outstanding Shares
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