The company reported net income of $300,000 for the year and 100,000 shares of common stock were

Question:

The company reported net income of $300,000 for the year and 100,000 shares of common stock were outstanding during the year. The income tax rate is 40%. The company has the following potentially dilutive securities. Assume that each of the securities was issued on or before January 1. Compute

(1) Basic EPS and

(2) Diluted EPS.

(a) Stock options that allow employees to purchase 30,000 shares of common stock. The option exercise price is $10 per share. The ending stock price for the year was $18.

(b) 10,000 convertible preferred shares (cumulative, 5%, $100 par). Each preferred share is convertible into four shares of common stock.

(c) 500 convertible bonds ($1,000 face value, 10%). Each bond is convertible into 40 shares of common stock.


Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on...
Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Intermediate Accounting

ISBN: 978-0324592375

17th Edition

Authors: James D. Stice, Earl K. Stice, Fred Skousen

Question Posted: