Question

On December 31, 2015, Berclair Inc. had 442 million shares of common stock and 5 million shares of 9%, $100 par value cumulative preferred stock issued and outstanding. Net income for the year ended December 31, 2016, was $1,050 million.

Also outstanding at December 31 were incentive stock options granted to executives. The options were exercisable for 30 million common shares at an exercise price of $56 per share. During 2016, the market price of the common shares averaged $70 per share.

Required: Compute Berclair's basic and diluted earnings per share for the year ended December 31, 2016.

Answer 1

Particulars	$
Net income	$       1,050,000,000
Less Dividend (5 million X 100 X 9%)	$          (45,000,000)
Net income attributable to common stockholders	$       1,005,000,000
Weighted average number of common stock outstanding	442,000,000
Basic EPS	$                        2.27
Particulars
Numerator for Diluted EPS
Net income attributable to common stockholders	$       1,005,000,000
Numerator for Diluted EPS	$       1,005,000,000
Denominator for Diluted EPS	442,000,000.00
Add Stock options exercised	30,000,000.00
Less Buy back of shares from the proceeds of options (30,000,000 X $56/$70)	(24,000,000.00)
Denominator for Diluted EPS	448,000,000.00
Diluted EPS	$                        2.24

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