During its first year of operations, McCollum Tool Works entered into the follow

Question

During its first year of operations, McCollum Tool Works entered into the following transactions relating to shareholders' equity. The corporation was authorized to issue 100 million common shares, $1 par per share. Jan. 2 3 Issued 35 million common shares for cash. Entered an agreement with the company president to issue up to 2 million additional shares of common stock in 2017 based on the earnings of McCollum in 2017. If net income exceeds $140 million, the president will receive 1 million shares; 2 million shares if net income exceeds $150 million. Mar. 31 Issued 4 million shares in exchange for plant facilities. Net income for 2016 was $148 million Required Compute basic and diluted earnings per share for the year ended December 31, 2016. (Enter your answers in millions (i.e., 10,000,000 should be entered as 10).) Numerator / Denominator = Earnings per Share Basic EPS Diluted EPS

Explanation / Answer

Numerator / Denominator = EPS

Basic EPS 148 / 35.08 = 4.22

Diluted EPS 148 / 35.08 = 4.22

Computation of Basic Earning per share

Numerator / Denominator = EPS

Basic EPS 148 / 35.08 = 4.22

Diluted EPS 148 / 35.08 = 4.22

Computation of Basic Earning per share

BEPS = Net income Available to share holders Weighted Average Number of Shares Outstanding Weighted Average Number of Shares Outstanding (millions) 2nd jan 35 31st Dec 1 As the net income is exceeding $ 140mln but not $150mln 35.08 BEPS = 4.22 Computation of Diluted Earning per share DEPS = (Net income Available to share holders-Preference dividend)+Convertible preference Dividend (Weighted Average Number of Shares Outstanding+ Shares From Converyible Pref share) 4.22

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