On December 31, 2017 Jackson Company had 100,000 shares of common stock outstand

Question

On December 31, 2017 Jackson Company had 100,000 shares of common stock outstanding and 24,000 shares of 7%, $50 par cumulative preferred stock outstanding. On February 28. 2018, Jackson purchased 18,000 shares of common stock on the open market as treasury stock for $29 per share. Jackson sold 5,400 treasury shares on September 30. 2018, for $31 per share. Net income for 2018 was $174,905. Also outstanding during the year were fully vested incentive stock options giving key personnel the option to buy 44,000 common shares at $34. The market price of the common shares averaged $33 during 2018 Required: Compute Jackson's basic and diluted earnings per share for 2018. (Round your answers to 2 decimal places.) Earnings per share Basic Diluted

Explanation / Answer

Solution:

Basic EPS = 1.05

Dilluted EPS = 1.07

Working:

Basic EPS = [174,905 - (7%*$50*24,000)] / [100,000 - (18,000 *10/12 ) + (5,400 *3/12 ) + (44,000 - 38,720) = 1.05

Dilluted EPS = [174,905 - (7%*$50*24,000)] / [100,000 - (18,000 * 10/12) + (5,400 * 3/12) + (44,000 - 45,333*) = 1.07

44,000 * 34 / 33 = 45,333

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