the end of 2021, selected records and accounts of Megamoth Corporation reflected the following information: Common stock, $5 par, authorized 800,000 shares; issued and outstanding 156,000 shares........................... $780,000 There were 100,000 shares of common stock outstanding at the beginning of the year. The company issued 25,000 additional shares on April 1, 2021, acquired and retired 5,000 shares July 1, 2021, and declared and issued 30% stock dividend on August 31, 2021. Preferred stock, par $20, 9%, cumulative, convertible into common stock on a share for share basis, issued and outstanding 10,000 shares......... 200,000 Paid-in-capital in excess of par: Common stock........................... 120,000 Paid-in-capital in excess of par: Preferred stock........................... 50,000 Stock options A outstanding for 50,000 shares of common at $20 exercise price (Issued 7-1-2021) Stock options B outstanding for 20,000 shares of common at $45 exercise price (issued 1-1-020) Retained earnings 875,000 Bonds payable, Series A 10%, nonconvertible (issued at par,) 500,000 Bonds payable, Series B 10%, convertible, each $1,000 bond is convertible into 60 shares of common stock (issued at par) 400,000 Net income 318,000 Average tax rate: 35% Average market price of common stock during 2021 - $40 The Series A bonds were issued at par on 4/1/2021, 20 year life. The Series B bonds were issued at par on 1/1/2019, 10 year life. REQUIRED:
At the end of 2021, selected records and accounts of Megamoth Corporation reflected the following information:
Common stock, $5 par, authorized 800,000 shares;
issued and outstanding 156,000 shares........................... $780,000
There were 100,000 shares of common stock outstanding
at the beginning of the year. The company issued
25,000 additional shares on April 1, 2021, acquired and
retired 5,000 shares July 1, 2021, and declared and issued
30% stock dividend on August 31, 2021.
convertible into common stock on a share for
share basis, issued and outstanding 10,000 shares......... 200,000
Paid-in-capital in excess of par: Common stock........................... 120,000
Paid-in-capital in excess of par: Preferred stock........................... 50,000
Stock options A outstanding for 50,000 shares
of common at $20 exercise price (Issued 7-1-2021)
Stock options B outstanding for 20,000 shares
of common at $45 exercise price (issued 1-1-020)
Bonds payable, Series A 10%, nonconvertible
(issued at par,) 500,000
Bonds payable, Series B 10%, convertible, each $1,000 bond
is convertible into 60 shares of common stock
(issued at par) 400,000
Net income 318,000
Average tax rate: 35%
Average market price of common stock during 2021 - $40
The Series A bonds were issued at par on 4/1/2021, 20 year life.
The Series B bonds were issued at par on 1/1/2019, 10 year life.
REQUIRED:
- Calculate the weighted average number of shares outstanding.
- Calculate the base (simple) EPS for Megamoth Corporation.
- Calculate the incremental per share effect (dilution index) for potentially dilutive securities and indicate their order of entry into calculation of diluted EPS.
- Compute the diluted earnings per share (EPS).
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