Answered: Basic Earnings Per Share $enter a…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Practice Problem 16-01 (Part Level Submission)

On January 1, 2016, Cullumber Company issued 10-year, $104,000 face value, 6% bonds at par (interest payable annually on January 1). Each $1,000 bond is convertible into 32 shares of Cullumber $2 par value common stock. The company has had 10,000 shares of common stock (and no preferred stock) outstanding throughout its life. None of the bonds have been converted as of the end of 2017. Cullumber also has adopted a stock-option plan that granted options to key executives to purchase 6,000 shares of the company’s common stock. The options were granted on January 2, 2016, and were exercisable 2 years after the date of grant if the grantee was still an employee of the company (the service period is 2 years). The options expired 6 years from the date of grant. The option price was set at $5, and the fair value option-pricing model determines the total compensation expense to be $23,000. All of the options were exercised during the year 2018: 3,000 on January 3 when the market price was $7, and 1,000 on May 1 when the market price was $8 a share. (Ignore all tax effects.)

Cullumber’s net income in 2017 was $30,000. Compute basic and diluted earnings per share for Cullumber for 2017. Cullumber’s average stock price was $6 in 2017. (Round answers to 2 decimal places, e.g. 15.25.)

Basic Earnings Per Share		$enter a dollar amount rounded to 2 decimal places
Diluted Earnings Per Share		$enter a dollar amount rounded to 2 decimal places

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