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Required: 1) Compute Washington's Basic and Diluted Earnings Per Share for 2020. Round final earnings per share amounts to the nearest cent

Required: 1) Compute Washington's Basic and Diluted Earnings Per Share for 2020. Round final earnings per share amounts to the nearest cent

FINANCIAL ACCOUNTING
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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Washington, Inc. had the following balances in stockholders' equity at January 1, 2020: Preferred Stock, 6%, $100 par, 25,000 shares authorized $ 200,000 Common Stock, $4 par, 2,000,000 shares authorized $ 300,000 Additional Paid-in Capital Common Stock $ 500,000 Retained Earnings $4,100,000 Each share of preferred stock is convertible into 12 shares of common stock, with the conversion rate automatically adjusted for stock dividends and stock splits. Washington accounts for treasury stock on the COST method. During the year the company had the following transactions related to equity securities: 2/1 Issued 3,000 common shares for $15.75 per share. 5/1 Declared a 10% stock dividend on issued common shares, to be distributed on May 31st to stockholders of record on May 20th. On the date of declaration the common stock was selling for $16.00 per share. 5/31 Distributed the stock dividend. 7/1 Repurchased 2,600 shares of common stock at $14.50 per share. 10/1 Issued 1,000 options for $24,000. Each option entitles the holder to purchase 8 shares of common stock at $14 per share. At the time of issuance the market price of the common stock was $15.25 per share. 11/1 700 Preferred shares were converted into common stock. 12/1 Resold 600 of the treasury shares at $15.70 per share. 12/10 Declared and paid a $325,000 cash dividend. The average market price of Washington's common stock was $15.60 per share during the year (after adjusting for the stock dividend); the company had net income of $790,000 during the year; and the company faced a 28% income tax rate. Required: 1) Compute Washington's Basic and Diluted Earnings Per Share for 2020. Round final earnings per share amounts to the nearest cent
Transcribed Image Text:Washington, Inc. had the following balances in stockholders' equity at January 1, 2020: Preferred Stock, 6%, $100 par, 25,000 shares authorized $ 200,000 Common Stock, $4 par, 2,000,000 shares authorized $ 300,000 Additional Paid-in Capital Common Stock $ 500,000 Retained Earnings $4,100,000 Each share of preferred stock is convertible into 12 shares of common stock, with the conversion rate automatically adjusted for stock dividends and stock splits. Washington accounts for treasury stock on the COST method. During the year the company had the following transactions related to equity securities: 2/1 Issued 3,000 common shares for $15.75 per share. 5/1 Declared a 10% stock dividend on issued common shares, to be distributed on May 31st to stockholders of record on May 20th. On the date of declaration the common stock was selling for $16.00 per share. 5/31 Distributed the stock dividend. 7/1 Repurchased 2,600 shares of common stock at $14.50 per share. 10/1 Issued 1,000 options for $24,000. Each option entitles the holder to purchase 8 shares of common stock at $14 per share. At the time of issuance the market price of the common stock was $15.25 per share. 11/1 700 Preferred shares were converted into common stock. 12/1 Resold 600 of the treasury shares at $15.70 per share. 12/10 Declared and paid a $325,000 cash dividend. The average market price of Washington's common stock was $15.60 per share during the year (after adjusting for the stock dividend); the company had net income of $790,000 during the year; and the company faced a 28% income tax rate. Required: 1) Compute Washington's Basic and Diluted Earnings Per Share for 2020. Round final earnings per share amounts to the nearest cent
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