Question 1 Waterway Inc. had net income for the current year ending December 31,

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Question 1 Waterway Inc. had net income for the current year ending December 31, 2017 of $954,330. During the entire year, there were 501,000 common shares outstanding. The company had two classes of preferred shares outstanding: the Class A preferred shares were $2.29 cumulative shares of which 12,000 were outstanding, and were convertible to common shares at a rate of 1:1. There were 102,000 $5.29 Class B non-cumulative preferred shares outstanding that were also convertible at a rate of 1:1. Waterway had outstanding a $1,000,000, 6% bond issued in 2009 that was convertible to 21,000 common shares. The company also had outstanding a $1,000,000, 5% bond issued in 2010 that was convertible to 26,000 common shares. No dividends were declared or paid this year. waterway's tax rate is 37%. Calculate basic earnings per share. (For simplicity, ignore the requirement to record the debt and equity portions of the convertible bond separately.) (Round answer to 2 decimal places, e.g. 15.25.) Basic earnings per share LINK TO TEXT LINK TO TEXT Round a cu ations EPS to 3 deci Calculate diluted earnings per share. For simplicity, ignore the requirement o record he deb and equity portions of the convertible bon $3.545 and provide final answer to 2 decimal places, e.g. 15.25.) separate r a la es, e Diluted earnings per

Explanation / Answer

Answer 1

Answer 2

Increase in earning attributable to equity shareholders on conversion of potential equity shares:

Diluted EPS = 1.52

Net Income                            9,54,330 Cumulative Preferred Shares Dividend                                27,480 Earning attributable to Equity Shareholders (A)                            9,26,850 Common Stock (B)                            5,01,000 Basic Earning Per Share                                     1.85

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