Exercise 19-20 EPS; contingently issuable sharesLO10 During its first year of op
ID: 2433691 • Letter: E
Question
Exercise 19-20 EPS; contingently issuable sharesLO10
During its first year of operations, McCollumTool Works entered into the following transactions relating toshareholders’ equity. The corporation was authorized to issue100 million common shares, $1 par per share.
Exercise 19-20 EPS; contingently issuable sharesLO10
During its first year of operations, McCollumTool Works entered into the following transactions relating toshareholders’ equity. The corporation was authorized to issue100 million common shares, $1 par per share.
Jan. 2 Issued 35 million common shares for cash. 3 Entered an agreement with the company president to issue up to2 million additional shares of common stock in 2010 based on theearnings of McCollum in 2010. If net income exceeds $140 million,the president will receive 1 million shares; 2 million shares ifnet income exceeds $150 million. Mar. 31 Issued 4 million shares in exchange for plant facilities. Net income for 2009 was $148million. Required: Compute basic and diluted earnings per share forthe year ended December 31, 2009. Round your answers totwo decimal places. Omit the "$" sign in yourresponse.Explanation / Answer
Now we cam answer teh problem based on above definitions asfolows"- 1. Basic EPS = Total Earnigs/No of shares O/S = 148m/(35+1+4)= 148m/40m = $3.7 per share
2. Diluted EPS = Total earnings/Total No of shares which couldhave been O/s if all optiosn etc were excercised = 148m/(35+2+4)m =148m/41m = $3.61 per share
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