Question

Grimm Company has 2,400,000 shares of common stock outstanding on December 31, 2016.

An additional 150,000 shares of common stock were issued on July 1, 2017, and 300,000 more on October 1, 2017.

On April 1, 2015, Grimm issued 6,000, $1,000 face value, 8% convertible bonds.

Each bond is convertible into 40 shares of common stock.

No bonds were converted into common stock in 2017.

Net income for 2017 was $25,500,000 and the company’s income tax rate is 40%.

What is the basic earnings per share and diluted earnings per share for the year ended December 31, 2017?

Answer 1

Please hit LIKE button if this helped. For any further explanation, please put your query in comment, will get back to you.
	Period	Share	Cumulative	Weighted Average
	6/12	2,400,000	2,400,000	1,200,000
	3/12	150,000	2,550,000	637,500
	3/12	300,000	2,850,000	712,500
Weighted Average no of shares				2,550,000
Net iNcome	a	$    25,500,000
Weighted Average no of shares	b	2,550,000
Basic Earning per share	a/b	$              10.00
Diluted Earning per share:
Net income before Bond interst			$    25,500,000
Interest on Bond (6,000*$1,000*8%)		$          480,000
Less: Tax 40%		$       (192,000)
			$          288,000
Net Income for Diluted EPS	a		$    25,212,000
Weighted Average no of shares			2,550,000
Add: Convertible Bond (6,000*40)			240,000
	b		2,790,000
Diluted EPS	a/b		$                 9.04