Question

In: Accounting

XYZ Company had 200,000 shares of common stock outstanding on December 31, 2020. On July 1,...

XYZ Company had 200,000 shares of common stock outstanding on December 31, 2020. On July 1, 2021, XYZ issued an additional 47,000 shares for cash. On January 1, 2021, XYZ issued 17,000 shares of convertible preferred stock. The preferred stock had a par value of $100 per share and paid a 6% dividend. Each share of preferred stock is convertible into 9 shares of common. During 2021, XYZ paid the regular annual dividend on the preferred and common stock. Net income for the year was $270,000.

Required: Calculate XYZ's basic and diluted earnings per share for 2021. (Round your answers to 2 decimal places.)

Earning per share
Basic
Diluted

Solutions

Expert Solution

a) XYZ's basic earnings per share for 2021 is calculated as follows:

   Earning Per Share = (Net Income - Prefrence Dividend) / Number of outstanding common shares

Prefrence Dividend = 17,000 shares * $100 * 6%

                           = $102,000

Number of outstanding common shares = 200,000 shares + ( 47,000 shares * 6 / 12)

                                                          = 200,000 shares + 23,500 shares

                                                          = 223,500 shares

Basic Earning Per Share = ($ 270,000 - $102,000) / 223,500 shares

                                     = $168,000 / 223,500 shares

                                  = $0.75 Per Share

   XYZ's basic earnings per share for 2021 is $0.75 Per Share            

b) XYZ's Diluted earnings per share for 2021 is calculated as follows:

   Earning Per Share = (Net Income - Prefence Dividend) / Number of outstanding common shares

Number of outstanding common shares = 200,000 shares + ( 47,000 shares * 6 / 12) + ( 17,000 shares * 9)

                                                          = 200,000 shares + 23,500 shares + 153,000 shares

                                                          = 376,500 shares

Diluted Earning Per Share = ($ 270,000 - $0) / 376,500 shares

                                    = $ 270,000/ 376,500 shares

                                  = $0.72 Per Share

     XYZ's Diluted earnings per share for 2021 is $0.72 Per Share

ekkarill92 answered 1 year ago
Next > < Previous

Related Solutions

XYZ Company had 200,000 shares of common stock outstanding on December 31, 2020. On July 1,...
XYZ Company had 200,000 shares of common stock outstanding on December 31, 2020. On July 1, 2021, XYZ issued an additional 40,000 shares for cash. On January 1, 2021, XYZ issued 10,000 shares of convertible preferred stock. The preferred stock had a par value of $100 per share and paid a 5% dividend. Each share of preferred stock is convertible into 8 shares of common. During 2021, XYZ paid the regular annual dividend on the preferred and common stock. Net...
On December 31, 2020, Jackson Company had 100,000 shares of common stock outstanding and 27,000 shares...
On December 31, 2020, Jackson Company had 100,000 shares of common stock outstanding and 27,000 shares of 7%, $50 par, cumulative preferred stock outstanding. On February 28, 2021, Jackson purchased 14,000 shares of common stock on the open market as treasury stock for $25 per share. Jackson sold 5,000 treasury shares on September 30, 2021, for $27 per share. Net income for 2021 was $170,905. Also outstanding during the year were fully vested incentive stock options giving key executives the...
On December 31, 2020, Jackson Company had 100,000 shares of common stock outstanding and 40,000 shares...
On December 31, 2020, Jackson Company had 100,000 shares of common stock outstanding and 40,000 shares of 6%, $50 par, cumulative preferred stock outstanding. On February 28, 2021, Jackson purchased 34,000 shares of common stock on the open market as treasury stock for $45 per share. Jackson sold 7,000 treasury shares on September 30, 2021, for $47 per share. Net income for 2021 was $190,905. Also outstanding during the year were fully vested incentive stock options giving key executives the...
On December 31, 2020, Heffner Company had 100,000 shares of common stock outstanding and 30,000 shares...
On December 31, 2020, Heffner Company had 100,000 shares of common stock outstanding and 30,000 shares of 7%, $100 par, cumulative preferred stock outstanding. On February 28, 2021, Heffner purchased 24,000 shares of common stock on the open market as treasury stock paying $45 per share. Heffner sold 6,000 of the treasury shares on September 30, 2021, for $47 per share. Net income for 2021 was $540,000. The income tax rate is 25%. Also outstanding at December 31, 2020, were...
. On December 31, 2020, Heffner Company had 100,000 shares of common stock outstanding and 30,000...
. On December 31, 2020, Heffner Company had 100,000 shares of common stock outstanding and 30,000 shares of 7%, $100 par, cumulative preferred stock outstanding. On February 28, 2021, Heffner purchased 24,000 shares of common stock on the open market as treasury stock paying $45 per share. Heffner sold 6,000 of the treasury shares on September 30, 2021, for $47 per share. Net income for 2021 was $540,000. The income tax rate is 25%. Also outstanding at December 31, 2020,...
Marigold Corp. had 1540000 shares of common stock issued and outstanding at December 31, 2020. On...
Marigold Corp. had 1540000 shares of common stock issued and outstanding at December 31, 2020. On July 1, 2021 an additional 1255000 shares were issued for cash. Marigold also had stock options outstanding at the beginning and end of 2021 which allow the holders to purchase 370000 shares of common stock at $20 per share. The average market price of Marigold's common stock was $25 during 2021. What is the number of shares that should be used in computing diluted...
  Ferry Corporation had 300,000 shares of common stock outstanding at December 31, 2020. In addition, it...
  Ferry Corporation had 300,000 shares of common stock outstanding at December 31, 2020. In addition, it had 90,000 stock options outstanding, which had been granted to certain executives on June 30, 2020, and which gave them the right to purchase shares of Ferry's stock at an option price of $35 per share. The average market price of Ferry's common stock for 2020 was $50. Net income was $1,000,000. SHOW ALL COMPUTATIONS> Compute EPS. Compute DEPS.
            Ferry Corporation had 300,000 shares of common stock outstanding at December 31, 2020. In addition,...
            Ferry Corporation had 300,000 shares of common stock outstanding at December 31, 2020. In addition, it had 90,000 stock options outstanding, which had been granted to certain executives on June 30, 2020, and which gave them the right to purchase shares of Ferry's stock at an option price of $35 per share. The average market price of Ferry's common stock for 2020 was $50. Net income was $1,000,000. SHOW ALL COMPUTATIONS> Compute EPS. Compute DEPS.
At December 31, 2014, Emley Company had 1,200,000 shares of common stock outstanding. On October 1,...
At December 31, 2014, Emley Company had 1,200,000 shares of common stock outstanding. On October 1, 2015, an additional 400,000 shares of common stock were issued. In addition, Emley had $10,000,000 of 6% convertible bonds outstanding at December 31, 2014, which are convertible into 800,000 shares of common stock. No bonds were converted into common stock in 2015. The net income for the year ended December 31, 2015, was $3,750,000. Assuming the income tax rate was 30%, what should be...
On December 31, 2017, Jackson Company had 100,000 shares of common stock outstanding and 30,000 shares...
On December 31, 2017, Jackson Company had 100,000 shares of common stock outstanding and 30,000 shares of 7%, $50 par, cumulative preferred stock outstanding. On February 28, 2018, Jackson purchased 24,000 shares of common stock on the open market as treasury stock paying $45 per share. Jackson sold 6,000 of the treasury shares on September 30, 2018, for $47 per share. Net income for 2018 was $180,905. Also outstanding at December 31, 2017, were fully vested incentive stock options giving...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT