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Question #3: Basic and diluted earnings per share (CLO #4) (6 marks)
On January 1, 2019, Petra Company had 1,400,000 shares of common share outstanding. On April
1, 2019, 120,000 shares were issued. On September 1, Petra bought 100,000 shares of treasury
share, on November 1, Petra declared 1.2 Share dividends, and on December 1, Petra voted 2 to 1
share split.
Petra issued $2,000,000 of 7% convertible bonds at face value during 2011. Each $1,000 bond is
convertible into 45 shares of common share.
During 2019, there were 55,000 shares of convertible preferred share outstanding. The preferred
is $100 par, pays 5.5% a year dividend, and is convertible into 3 shares of common share.
The tax rate is 40%. Petra had $2,500,000 net income in 2019.
Instructions:
Compute Basic and diluted earnings per share for 2019. Show all computations.
Good Luck!
(UNITED STATES)
