
Concept explainers
Earnings per share: Earnings per share (EPS) indicates the income earned per share of common stock. EPS is calculated as Basic EPS and Diluted EPS.
The income for EPS is calculated by subtracting the preference dividends. The income is divided by weighted-average common shares outstanding. This is Basic EPS. Basic EPS does not consider the dilutive effects of convertible long-term debts. Diluted EPS is based on the assumption that for all convertible securities like
To compute: To compute diluted earnings per share.
Given Information: Net income: $270,000.
Shares outstanding: 50,000.
Preferred stock: 5,000.
Conversion Ratio: 2 shares of common.
Preferred dividend: $5.
Tax rate: 40%.

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Chapter 16 Solutions
Intermediate Accounting
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