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Assume that the following data relative to Kane Company for 2018 is available: Net Income $2,790,000...

Assume that the following data relative to Kane Company for 2018 is available:

Net Income $2,790,000
Transactions in Common Shares Change Cumulative
Jan. 1, 2018, Beginning number 680,000
Mar. 1, 2018, Purchase of treasury shares (66,600) 613,400
June 1, 2018, Stock split 2-1 613,400 1,226,800
Nov. 1, 2018, Issuance of shares 234,000 1,460,800
6% Cumulative Convertible Preferred Stock
Sold at par, convertible into 200,000 shares of common (adjusted for split). $1,000,000
Stock Options
Exercisable at the option price of $25 per share. Average market price in 2018, $30 (market price and option price adjusted for split). 81,000 shares

1. Compute weighted average shares outstanding for 2018.

2. Compute the basic earnings per share for 2018.

3. Compute the diluted earnings per share for 2018.

Solutions

Expert Solution

Computation of Weighted Average Shares Outstanding during the Year
Date Particulars Calculation Final Amount
01-Jan Outstanding at the opening           6,80,000
01-Mar Less: Repurchase of Treasury Share 66000*10/12               55,000
Sahres Available for Split           6,25,000
01-Jun 2 For 1 Split 625000*2         12,50,000
01-Nov Add:Issued 234000*2/12               39,000
        12,89,000
6% Convertible preference stock           2,00,000
Add: Stock Option
Share issue upon Exercise of Option 81000
Less: Treasury Stock Purchaseable With proceed (81000*25)/30 67500               13,500
        14,75,500
Basic Earnign Per Share = Earning Attributable to Comman Stock Holder
Weighted Avearge Share Outstanding
Earning Attributable to Comman Stock Holder= Net Income-Preference Share Dividend
Earning Attributable to Comman Stock Holder= 2790000-(1000000*6%)
Earning Attributable to Comman Stock Holder= 2730000
Basic Earnign Per Share = 2730000/1289000                    2.12
Diluted Earnign Per Share = Earning Attributable to Comman Stock Holder including Potential Comman Stock Holder
Weighted Avearge Share Outstanding Including Potential Comman Stock
Diluted Earnign Per Share 2790000/1475500                    1.89

ekkarill92 answered 2 years ago
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