- UID
- 223231
- 帖子
- 520
- 主题
- 166
- 注册时间
- 2011-7-11
- 最后登录
- 2013-8-21
|
Selected information from Gerrard, Inc.’s financial activities in the most recent year was as follows:
Net income was $330,000.
The tax rate was 40%.
700,000 shares of common stock were outstanding on January 1.
The average market price per share for the year was $6.
Dividends were paid during the year.
2,000 shares of 8% $500 par value preferred shares, convertible into common shares at a rate of 200 common shares for each preferred share, were outstanding for the entire year.
200,000 shares of common stock were issued on March 1.
Gerrard, Inc.’s diluted earnings per share (diluted EPS) was closest to:
To compute Gerrard’s basic earnings per share (EPS) ((net income – preferred dividends) / weighted average common shares outstanding), the weighted average common shares outstanding must be computed. 700,000 shares were outstanding from January 1, and 200,000 shares were issued on March 1, so the weighted average is 700,000 + (200,000 × 10 / 12) = 866,667. Basic EPS was $330,000 − (2,000 × $500 × 0.08)) / 866,667 = $0.289.
If the convertible preferred shares were converted to common stock, 2,000 × 200 = 400,000 additional common shares would have been issued and dividends on the preferred stock would not have been paid. Diluted EPS was $330,000 / (866,667 + 400,000) = $0.261. |
|