ACCT $322$

Chapter $15$

In$-$class$/$Group Problem

Lizbeth Johnson, controller of Detroit Industries, a public company, is preparing the calculation for basic

and diluted earnings per share and the related disclosure for Detroit's financial statements. Below is

selected financial information for the March $31,2025$ fiscal year.

DETROIT INDUSTRIES

Selected Balance Sheet Information

March $31,2025$

Long$-$term debt

Notes payable to banks, $12\%$

$4\%$ convertible bonds payable

$12\%$ bonds payable

Total long$-$term debt

Shareholders' equity

Preferred stock, $5\%$ cumulative, $$100$ par value,

$100,000$ shares authorized, $50,000$ shares issued

and outstanding

$$5,000,000$

Common stock, $$1$ par, $10,000,000$ shares authorized,

$2,000,000$ shares issued and outstanding

Additional paid$-$in capital

Retained earnings

Total shareholders' equity

The following transactions have also occurred at Detroit:

Options to purchase $150,000$ shares at $$21$ per share were granted on October $1,2024.$

Although no options were exercised during fiscal year $2025,$ the average price per

common share during fiscal year $2025$ was $$24$ per share.

Each bond was issued at face value. The $4\%$ convertible bonds will convert into common

stock at $30$ shares per $$1,000$ bond. The bonds are exercisable after $5$ years and were

issued in the fiscal year $2022.$

The preferred stock was issued in $2023.$

There are no preferred dividends in arrears; however, preferred dividends were not

declared in fiscal year $2025.$

The $2,000,000$ shares of common stock were outstanding for the entire $2025$ fiscal year.

Net income for fiscal year $2025$ was $$2,700,000,$ and the average income tax rate is $20\%.$

Instructions

For the fiscal year ended March $31,2025,$ calculate the following for Detroit Industries:

a$.$ Basic earnings per share.

b$.$ Diluted earnings per share