At January 1, 2018, Canaday Corporation had outstanding the following securities

Question

At January 1, 2018, Canaday Corporation had outstanding the following securities:

760 million common shares
30 million 6% cumulative preferred shares, $50 par
7% convertible bonds, $3,000 million face amount, convertible into 90 million common shares

The following additional information is available:

On September 1, 2018, Canaday sold 81 million additional shares of common stock.

Incentive stock options to purchase 50 million shares of common stock after July 1, 2017, at $10 per share were outstanding at the beginning and end of 2018. The average market price of Canaday’s common stock was $20 per share during 2018.

Canaday's net income for the year ended December 31, 2018, was $1,540 million. The effective income tax rate was 40%.

Required:
1. & 2. Calculate basic and the diluted earnings per common share for the year ended December 31, 2018. (Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)
  

Numerator/ Denominator = earnings per share
Diluted earnings = $1576 / ? = ?

Explanation / Answer

Numerator /Net income 1540 - (50*6%*30) = 1450 Denominator/Number of shares 760*12/12+81*4/12 = 787 Basic EPS 1450/787 1.84 Diluted EPS 7%*3000*60% =126 Numerator /Net income 1450+126 = 1576 Denominator/Number of shares 787+30+90 = 907 Diluted EPS 1576/907 1.74

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