The information below pertains to Barkley Company for 2015. There were no change
ID: 2425326 • Letter: T
Question
The information below pertains to Barkley Company for 2015.
There were no changes during 2015 in the number of common shares, preferred shares, or convertible bonds outstanding. There is no treasury stock. The company also has common stock options (granted in a prior year) to purchase 79,000 shares of common stock at $20 per share.
(a) Compute basic earnings per share for 2015. (Round answer to 2 decimal places, e.g. $2.55.)
(b) Compute diluted earnings per share for 2015. (Round answer to 2 decimal places, e.g. $2.55.)
Explanation / Answer
(a)
EPS= Net income available for shareholders / Number of shares outstandint
Net income Availble for shr : ($1,228,000-(4,095,000*0.07) =$941,350
Number of shares outstanding =6,052,000/10 =605,200
therefore EPS= 941,350/605,200 =$1.55
(b)
Diluted EPS= (Net income – Preferred dividends) + Interest savings (net of tax) / Average common shares + Potentially dilutive common shares
Net income :$1,228,000
Preferred dividend : 4,095,000*0.07 = $286,650
Interest of savings :2,342,000*0.09*(1-0.4) =$126,468
potentially dialluted shares
a. 2,342,000/1000*40 =93680 shares/ bonds
b. Market price - average price / Market price * Number of option shares
30-20/30*79000=26333.33 rounded to 26333 shares
Therefore Diluted EPS=
(1,228,000-286,650)+126,468/605,200+93680+26333
=814882/725213 =$1.12
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.