Net income for the year is $2,000,000 Common share activity during the year: Jan. 1, 200,000 shares outstanding Apr. 1, issued 20,000 shares Jul. 1, declared 2-for-1 stock split Sept. 1, purchased 30,000 shares Options A: During the year, 24,000 options existed to buy common stock at an exercise price of $40. The average stock price was $30 during year. No options were actually exercised.Options B: During the year, 40,000 options existed to buy common stock at an exercise price of $30. The average stock price was $50 during year. No options were actually exercised. Convertible preferred stock: During year, there were 10,000 shares of cumulative convertible preferred stock, $100 par, 8% dividend, each convertible into three shares of common stock. A preferred dividend was not declared or paid during the year. Convertible bonds: Three thousand, 6%, convertible bonds were sold on July 1 of this year, each with a $1,000 face value and convertible into 10 shares of common stock. None was actually converted. Assume a marginal tax rate of 35%. Assume that the share information given for dilutive securities (e.g., options, conv. pref. stock, conv. bonds) has already accounted for any splits or stocks dividends that occurred. Instructions: Show how earnings per share should appear on the face of the income statement for the year. Check figure: BEPS (net income) = $4.57; DEPS (net income) = $4.28
Net income for the year is $2,000,000
Common share activity during the year:
Jan. 1, 200,000 shares outstanding
Apr. 1, issued 20,000 shares
Jul. 1, declared 2-for-1 stock split
Sept. 1, purchased 30,000 shares
Options A: During the year, 24,000 options existed to buy common stock at an exercise price of $40. The average stock price was $30 during year. No options were actually exercised.
Options B: During the year, 40,000 options existed to buy common stock at an exercise price of $30. The average stock price was $50 during year. No options were actually exercised.
Convertible preferred stock: During year, there were 10,000 shares of cumulative convertible preferred stock, $100 par, 8% dividend, each convertible into three shares of common stock. A preferred dividend was not declared or paid during the year.
Convertible bonds: Three thousand, 6%, convertible bonds were sold on July 1 of this year, each with a $1,000 face value and convertible into 10 shares of common stock. None was actually converted. Assume a marginal tax rate of 35%.
Assume that the share information given for dilutive securities (e.g., options, conv. pref. stock, conv. bonds) has already accounted for any splits or stocks dividends that occurred.
Instructions: Show how earnings per share should appear on the face of the income statement for the year. Check figure: BEPS (net income) = $4.57; DEPS (net income) = $4.28
Step by step
Solved in 2 steps
