Merion Company provided the following share information for the current year.
Event and Date Number of Shares
1/1 Beginning balance……………………………….150,000
6/1 New share issue………………………………….240,000
8/1 Two-for-one stock split
10/1 New share issue………………………………... 390,000
12/1 Treasury stock acquisition……………………… (48,000)
Merion reported income from continuing operations of $ 1,000,000 and a $ 430,000 loss from discontinued operations, net of tax. The company is subject to a 40% tax rate. The company granted 120,000 employee options on January 1 allowing employees to acquire 120,000 common shares at $ 18 per share. The options have an estimated fair value of $ 10 per share. The average market price of the company’s common shares is $ 24 per share. Merion has $ 500,000, 6% convertible debt outstanding as of the beginning of the year. Each $ 1,000 par value bond converts into eight shares of the company’s common stock. Merion also has $ 140,000 par value, 4% convertible preferred shares outstanding for the current year. The board of directors declared the annual dividend. The preferred shares can convert into 10,000 shares of common stock. There were no actual exercises or conversions during the year.
Required
a. Compute the weighted-average number of common shares outstanding for basic earnings per share.
b. Determine whether any securities are antidilutive and compute basic and diluted earnings per share. Show all computations.
c. Prepare all required disclosures beginning with income from continuing operations.