In 2020 Our Company had Net In
In 2020 Our Company had Net Income of $550,000. On 1/1/20, therewere 100,000 shares of common stock outstanding. On 4/1/20, weissued 36,000 shares of common stock. On 6/1/20, we issued 24,000shares of $100 par value, 6% cumulative preferred stock. Thispreferred stock is convertible into 48,000 shares of common stock.On 9/1/20, we issued $6,000,000 of 4% bonds at par. These bonds areconvertible into 48,000 shares of common stock. The marginal taxrate is 25%. In addition, there are 90,000 options outstanding at12/31/20. Each option entitles the holder to exchange it for 1share of common stock at an exercise price of $20 per share. Theaverage market price for common stock for 2020 was $50.
required
how much is the basic earnings per share?
how much is diluted earnings per share ?
Answer:
1)Basic Earnings per share= [Net Income(After taxes)-Preferred Stock Dividend] / Weighted Average number of Outsandingstocks
2)Diluted Earnings per share=[Net Income(After taxes)-Preferred Stock Dividend] / [Weighted Average number of Outsandingstocks + Weighted Average number of Dilutive stocks]
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