Net income for the year 6% convertible bonds issued at par ($1,000 per bond); each bond is convertible into 60 shares of common stock 4% convertible, cumulative preferred stock, $100 par value; each share is convertible into 4 shares of common stock Common stock, $1 par value Tax rate for 2021 Average market price of common stock $8,670,000 5,000,000 2,500,000 9,500,000 20% $18 per share There were no changes during 2021 in the number of common shares, preferred shares, or convertible bonds outstanding. There is no treasury stock. The company also has common stock options (granted in a prior year) to purchase 120,000 shares of com- mon stock at $12 per share. Instructions (a) Compute basic earnings per share for 2021. (b) Compute diluted earnings per share for 2021.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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  • (Computation of Basic and Diluted EPS) The information below pertains to Payson Company for 2021.
Net income for the year
6% convertible bonds issued at par ($1,000 per bond); each bond is convertible into
60 shares of common stock
4% convertible, cumulative preferred stock, $100 par value; each share is convertible
into 4 shares of common stock
Common stock, $1 par value
Tax rate for 2021
Average market price of common stock
$8,670,000
5,000,000
2,500,000
9,500,000
20%
$18 per share
There were no changes during 2021 in the number of common shares, preferred shares, or convertible bonds outstanding. There
is no treasury stock. The company also has common stock options (granted in a prior year) to purchase 120,000 shares of com-
mon stock at $12 per share.
Instructions
(a) Compute basic earnings per share for 2021.
(b) Compute diluted earnings per share for 2021.
Transcribed Image Text:Net income for the year 6% convertible bonds issued at par ($1,000 per bond); each bond is convertible into 60 shares of common stock 4% convertible, cumulative preferred stock, $100 par value; each share is convertible into 4 shares of common stock Common stock, $1 par value Tax rate for 2021 Average market price of common stock $8,670,000 5,000,000 2,500,000 9,500,000 20% $18 per share There were no changes during 2021 in the number of common shares, preferred shares, or convertible bonds outstanding. There is no treasury stock. The company also has common stock options (granted in a prior year) to purchase 120,000 shares of com- mon stock at $12 per share. Instructions (a) Compute basic earnings per share for 2021. (b) Compute diluted earnings per share for 2021.
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