-VII On December 31, 2008, Jackson Company had 100,000 shares of common stock ou
ID: 2588915 • Letter: #
Question
-VII On December 31, 2008, Jackson Company had 100,000 shares of common stock outstanding and 30,000 shares of 7%, SSO par, cumulative preferred stock outstanding. On February 28, 2009, Jackson purchased 24,000 shares of common stock on the open market as treasury stock paying $45 per share. Jackson soled 6,000 of the treasury shares on September 30, 2009, for $47 per share. Net income for 2009 was S180,905. Also outstanding at December 31, 2008, were fully vested incentive stock options giving personnel the option to buy 50,000 common shares at $4 Nov 0. These stock options were exercised on ember 1, 2009. During 2009, the average market price of the common shares was $50 with a closing price of $51 on December 31, 2009. Required: Compute Jackson's basic and diluted earnings per share for 2009. 105, as 76 40 u2Explanation / Answer
Basic EPS:
Earning Per Share = (net income-preferred dividends)/weighted average common shares outstanding
= [$180,905 - (7% x $50 x 30,000)]/[100,000 - (24,000 x 10/12) + (6,000 x 3/12)]
=$.93
Basic EPS (Earning Per Share) of Jackson for 2009 =$.93
Diluted EPS
Diluted Earning per share = (Total income –Preferred dividends)/(outstanding shares + diluted shares)
=[$180,905 - (7% x $50 x 30,000)]/[100,000 - (24,000 x 10/12) + (6,000 x 3/12) +(50,000 - 40,000*)]
= 75,905/91,500
= $.83
* (50,000 x $40)/$50 = 40,000.
Basic Diluted EPS (Earning Per Share) of Jackson for 2009 = $.83
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