In 2020 Our Company had Net Income of $550,000. On 1/1/20, there were 100,000 shares of...

In 2020 Our Company had Net Income of $550,000. On 1/1/20, there were 100,000 shares of common stock outstanding. On 4/1/20, we issued 36,000 shares of common stock. On 6/1/20, we issued 24,000 shares of $100 par value, 6% cumulative preferred stock. This preferred 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 are convertible into 48,000 shares of common stock. The marginal tax rate is 25%. In addition, there are 90,000 options outstanding at 12/31/20. Each option entitles the holder to exchange it for 1 share of common stock at an exercise price of $20 per share. The average 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 ?

Expert Solution

1)Basic Earnings per share= [Net Income(After taxes)- Preferred Stock Dividend] / Weighted Average number of Outsanding stocks

2)Diluted Earnings per share=[Net Income(After taxes)- Preferred Stock Dividend] / [Weighted Average number of Outsanding stocks + Weighted Average number of Dilutive stocks]

ekkarill92 answered 2 years ago

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