Throughout 2020, Moon Ltd. had 1,200,000 common shares outstanding. As well, the corporation paid $300,000 in...

Throughout 2020, Moon Ltd. had 1,200,000 common shares outstanding. As well, the corporation paid $300,000 in preferred dividends and reported net income of $5,100,000 for 2020. In connection with the acquisition of a subsidiary company in June 2019, Moon is required to issue 50,000 additional common shares on July 1, 2021, to the former owners of the subsidiary.

Moon’s diluted earnings per share for 2020 should be:

$4.25.

$4.08.

$4.00.

$3.84.

Expert Solution

WORKING NOTES:

	CALCULATION OF THE TOTAL SHARES OUTSTANDING AT END OF YEAR

	Total Shares Outstanding	12,00,000	Shares
	Add: Addittional Shares required to issue	50,000	Shares
	Total Adjusted Shares Outstanding	12,50,000	Shares

SOLUTION:
	CALCULATION OF DILUTED EARNING PER SHARES

	Diluted Earning Per Shares =	(Net Income	-	Preferred Dividends)	"/"	Adjusted Shares Outstanding
	Diluted Earning Per Shares =	$ 51,00,000	-	$ 3,00,000	"/"	12,50,000
	Diluted Earning Per Shares =	$ 48,00,000	"/"	12,50,000
	Diluted Earning Per Shares =	3.84

Answer = Option 4 = $ 3.84

ekkarill92 answered 2 years ago

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