The Swirlie Company had net income for 2xx9 of $300,000. Beginning balance in $1

Question

The Swirlie Company had net income for 2xx9 of $300,000. Beginning balance in $100 par, 8% cumulative preferred stock is $1,000,000. No dividends are in arrears. $1,000,000 in 6% convertible bonds are outstanding during the year. Each $1,000 bond is convertible into 2 shares of common stock. Beginning balance in retained earnings is $400,000 Beginning of the year outstanding common stock shares 100,000 Par value is $10 Issued additional shares common stock March 1st 10,000 Received $12 per share Purchased shares of treasury stock on September 1 5,000 Paid $75,000 Issued 2 for 1 stock split on October 17th. Tax Rate is 20% Required: What is diluted earnings per share for the year?

Explanation / Answer

1 Change Final Period in month Ratio (period/12) Average number of outstanding shares (Final*Ratio) Jan 1 2009 Beginning 100000 2 0.17 16667 Mar 1 New 10000 110000 6 0.50 55000 Sep 1 Purchase -5000 105000 1.5 0.13 13125 Oct 17 Split 2 for 1 105000 210000 2.5 0.21 43750 12 128542 Additional share for the purpose of Dilluted earning per share 8% convertible preferred stock 10000 9% Convertible Bond 1000000/1000*2 2000 Total Additional shares for Dilluted EPS 12000 Dilluted EPS: Net After tax income 300000 Add: back interest on bond 1000000*6% 60000 Less: Income Tax 20% 60000*20% 12000 Net income for Dilluted EPS 348000 Diluted EPS 348000/(128542+12000 additional share) Diluted EPS                 2.48

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.