Ice King Products Ltd. reported a net income after taxes of $6 million in 2016. Their capital structure included the following as of December 31, 2016:

Long-term debt: Bonds payable, due 2020, 12% …………………………………………………………………………………… Bonds payable, due 2024, convertible into ordinary shares at the rate of two shares per $100. The interest on the liability component of the convertible bonds payable for the fiscal year ending June 30,2016, was $800,000……………………………………………………………...	$ 5,000,000 $10,000,000
Shareholders’ equity: Preferred shares, $4.50, no par, cumulative, convertible into ordinary shares at the rate of two ordinary shares for each preferred share…………………………………………………………. Preferred shares, $2.50 no par, cumulative, convertible into common shares at the rate of one common share for each preferred share…………………………………………………………… Ordinary shares…………………………………………………………………………………………………………….	Number of Shares Outstanding 150,000 400,000 1,500,000
Options to purchase ordinary shares: 100,000 shares at $20 expire in 2020 200,000 shares at $30, expire in 2022
Transactions during the year: On July 1, 400,000 ordinary shares were issued on the conversion of 200,000 $4.50 preferred shares. On December 1, 100,000 ordinary shares were issued for cash.
Other information: Tax rate, 25% Quarterly dividends are declared on March 30, June 30, September 30, and December 31. The average 2016 market price of ordinary shares is $50

Required:

(a) Determine the number of shares used to compute basic earnings per share for the year ended December 31, 2016.

(b) Compute the adjusted net income to be used as the numerator in the basic earnings per share calculation for the year ended December 31, 2016. 

(c) Compute basic earnings per share for 2016.

Answer rating: 100% (QA)

a Number of shares to compute basic earnings per share Shares at beginning Shares at end shares ... View the full answer