Question

1. Compute the Basic Earnings Per Share for 20Y5: Basic Earnings Per Share = (Net Income - Preferred Dividends) / Weighted Average Common Shares Outstanding Preferred Dividends = 2,250 shares * $50 par * 8.0% = $9,000 Weighted Average Common Shares Outstanding = (21,600 shares * 4/12) + (24,300 shares * 8/12) = 22,950 shares Basic Earnings Per Share = ($72,500 - $9,000) / 22,950 shares 2. Compute the Diluted Earnings Per Share for 20Y5: Diluted Earnings Per Share = (Net Income - Preferred Dividends) / (Weighted Average Common Shares Outstanding + Conversion of Preferred Stock + Conversion of Bonds) Conversion of Preferred Stock = 2,250 shares * 2 = 4,500 shares Conversion of Bonds = $225,000 / $1,000 * 20 = 4,500 shares Diluted Earnings Per Share = ($72,500 - $9,000) / (22,950 shares + 4,500 shares + 4,500 shares)

          1. Compute the Basic Earnings Per Share for 20Y5:
Basic Earnings Per Share = (Net Income - Preferred Dividends) / Weighted Average Common Shares Outstanding
Preferred Dividends = 2,250 shares * $50 par * 8.0% = $9,000
Weighted Average Common Shares Outstanding = (21,600 shares * 4/12) + (24,300 shares * 8/12) = 22,950 shares
Basic Earnings Per Share = ($72,500 - $9,000) / 22,950 shares

2. Compute the Diluted Earnings Per Share for 20Y5:
Diluted Earnings Per Share = (Net Income - Preferred Dividends) / (Weighted Average Common Shares Outstanding + Conversion of Preferred Stock + Conversion of Bonds)
Conversion of Preferred Stock = 2,250 shares * 2 = 4,500 shares
Conversion of Bonds = $225,000 / $1,000 * 20 = 4,500 shares
Diluted Earnings Per Share = ($72,500 - $9,000) / (22,950 shares + 4,500 shares + 4,500 shares)

Added by Jacqueline H.

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