Question

In: Accounting

From the December 31, 2019 balance sheet: Convertible Preferred Stock, 6% cumulative, $100 par value, 100,000...

From the December 31, 2019 balance sheet:

Convertible Preferred Stock, 6% cumulative, $100 par value, 100,000 shares authorized, 50,000 shares issued and outstanding. Dividends to preferred shareholders have been declared on schedule. Each preferred share is convertible to 4 shares of common stock (already adjusted for the 5% stock dividend).

Common Stock, $1 par, 10,000,000 shares authorized, 2,400,000 shares issued and outstanding.

Convertible bonds payable, 6% interest rate, $7,000,000 balance at December 31, 2018, issued at a discount on March 15, 2014. Each of the $1,000 bonds is convertible into 10 shares of common stock (already adjusted for the 5% stock dividend).

WDW Enterprises reported $450,000 of Bond Interest Expense on the convertible bonds in 2019, before income taxes.  
Executive employees were granted 270,000 stock options (already adjusted for the 5% stock dividend) on October 1, 2019 with an exercise price of $40 per share. The options will become exercisable on January 2, 2020 and the exercise period expires on October 1, 2025. During the 2019 year the average market price per common share of WDW Enterprises was $60 per share.
WDW declared a 5% stock dividend on March 1, 2020 when the market price was $50 per share.  
On July 1, 2020, WDW repurchased 100,000 shares at a cost of $54 per share.
On September 1, 2020, WDW Enterprises issued 400,000 common shares at $62 per share to raise funds for the acquisition of 20th Century Fox Technology.  
Net income for the 2020 year is $7,500,000, after tax. The income tax rate is 25%.  

compute the Weighted Average Number of Common Shares for WDW Enterprises’ 2020 BASIC EARNINGS PER share

Compute Earnings Available to Common Shareholders for WDW Enterprises’ 2020 BASIC EARNINGS PER SHARE

Compute basic EPS

Determine WDW Enterprises’ 2020 DILUTED EARNINGS PER SHARE. Show computations that determine if any potentially dilutive security is dilutive or antidilutive.  

Computations for Convertible Preferred Stock (Incremental)

Computations for Convertible Bonds Payable (Incremental)

Computations for Stock Options (Incremental)

Weighted Average Number of Common Shares for WDW Enterprises’ 2020 DILUTED EARNINGS PER SHARE?

Earnings Available to Common Shareholders for WDW Enterprises’ 2020 DILUTED EARNINGS PER SHARE?

Compute diluted EPS

Solutions

Expert Solution

Weighted Average Number of Common Shares for WDW Enterprises’ 2020

Shares Outstanding Period Weighted Average Shares
1-Jan                   2,400,000 12/12 2,400,000
1-Sep                      400,000 4/12      133,333
Weighted average shares outstanding 2,533,333

Earnings Available to Common Shareholders for WDW Enterprises’ 2020 = $7,200,000

Workings
Basic
Net Income $    7,500,000
Preferred Dividend 100*50000*6% $       300,000
$    7,200,000
Numerator Denominator Earnings per Share
Basic $              7,200,000        2,533,333 $         2.84

DILUTED EPS

Convertible Preferred Stock (Incremental) (100,000*4) = 400,000 Shares

Dilutive security - EPS ($ 7,500,000 / 2,533,333 + 400,000) = $2.55

Convertible Bonds Payable (Incremental) (7,000,000/1000*100) = 70,000 Shares

Extra earnings on interest = $ 450,000

Antidilutive security - EPS ($7,200,000 + 337,500 / 2,533,333 + 70,000) = $2.89

Stock Options (Incremental) (270,000 - 270,000 * 40/60) = 90,000 Shares

Dilutive security - EPS ($ 7,500,000 / 2,533,333 + 90,000) = $2.74

Weighted Average Number of Common Shares for WDW Enterprises’ 2020 = 3,093,333

2533333+(400000+70000+90000) = 3,093,333

Earnings Available to Common Shareholders for WDW Enterprises’ 2020 =  $ 7,837,500

7500000+(450000*75%) = $ 7,837,500

Numerator Denominator Earnings per Share
Diluted $   7,837,500          3,093,333 $      2.53

ekkarill92 answered 1 year ago
Next > < Previous

Related Solutions

VInce Corporation's December 31, 2017 balance sheet showed the following: 6%preferred stock, $20 par value cumulative,30,000...
VInce Corporation's December 31, 2017 balance sheet showed the following: 6%preferred stock, $20 par value cumulative,30,000 shares authorized;20,000 shares issued. $400,000 Common Stock $10 par value, $3,000,000 shares authorized;1,950,000 shares issued, 1,920,000 shares outstanding 19,500,000 Paid-in capital in excess of par value - preferred stock 60,000 Paid-in capital in excess of par value - common stock 28,000,000 Retained earnings   9,650,000 Treasury stock (30,000 shares) 630,000 a) calculate the total Paid in Capital b) Calculate the total Stockholders Equity c) Calculate...
Sturdley Corporation has 20,000 shares of $100 par value, 7% cumulative preferred stock outstanding and 100,000...
Sturdley Corporation has 20,000 shares of $100 par value, 7% cumulative preferred stock outstanding and 100,000 of its $1 par value common stock outstanding. In their first four years of operation they paid the following cash dividends: 2016 -0- 2017 $240,000 2018 $280,000 2019 $180,000 Determine the total cash dividends paid during the four years with preferred stock as cumulative and then calculate it again with the preferred stock as non-cumulative.
Last Inc., has 2,000 shares of 6%, $50 par value, cumulative preferred stock and 100,000 shares...
Last Inc., has 2,000 shares of 6%, $50 par value, cumulative preferred stock and 100,000 shares of $1 par value common stock outstanding at December 31, 2013, and December 31, 2012. The board of directors declared and paid a $5,000 dividend in 2012. In 2013, $24,000 of dividends are declared and paid. What are the dividends received by the preferred stockholders in 2013?
Sabas Company has 20,000 shares of $100 par, 2% cumulative preferred stock and 100,000 shares of...
Sabas Company has 20,000 shares of $100 par, 2% cumulative preferred stock and 100,000 shares of $50 par common stock. The following amounts were distributed as dividends: Year 1: $10,000 Year 2: 45,000 Year 3: 90,000 Determine the dividends per share for preferred and common stock for the first year
Raphael Corporation’s balance sheet shows the following stockholders’ equity section. Preferred stock—5% cumulative, $___ par value,...
Raphael Corporation’s balance sheet shows the following stockholders’ equity section. Preferred stock—5% cumulative, $___ par value, 1,000 shares authorized, issued, and outstanding $ 70,000 Common stock—$___ par value, 4,000 shares authorized, issued, and outstanding 180,000 Retained earnings 370,000 Total stockholders' equity $ 620,000 1. What are the par values of the corporation’s preferred stock and its common stock?  If no dividends are in arrears at the current date, what is the book value per share of common stock?  If two years’ preferred...
Raphael Corporation’s balance sheet shows the following stockholders’ equity section. Preferred stock—5% cumulative, $___ par value,...
Raphael Corporation’s balance sheet shows the following stockholders’ equity section. Preferred stock—5% cumulative, $___ par value, 1,000 shares authorized, issued, and outstanding $ 75,000 Common stock—$___ par value, 4,000 shares authorized, issued, and outstanding 120,000 Retained earnings 360,000 Total stockholders' equity $ 555,000 1. What are the par values of the corporation’s preferred stock and its common stock? 2. If no dividends are in arrears at the current date, what is the book value per share of common stock? 3....
Net income $2,350,000, Preferred stock: 52,000 shares outstanding, $100 par, 9% cumulative, not convertible 5,200,000 Common...
Net income $2,350,000, Preferred stock: 52,000 shares outstanding, $100 par, 9% cumulative, not convertible 5,200,000 Common stock: Shares outstanding 1/1 686,400   Issued for cash, 5/1 270,000    Acquired treasury stock for cash, 8/1 148,800    2-for-1 stock split, 10/1 Compute earnings per share:
#1 Sabas Company has 20,000 shares of $100 par, 2% cumulative preferred stock and 100,000 shares...
#1 Sabas Company has 20,000 shares of $100 par, 2% cumulative preferred stock and 100,000 shares of $50 par common stock. The following amounts were distributed as dividends: Year 1: $10,000 Year 2: 45,000 Year 3: 90,000 Determine the dividends per share for preferred and common stock for the THIRD year. a. $3.25 and $0.25 b. $4.50 and $0.90 c. $4.50 and $0.25 d. $2.00 and $0.25 #2 Alma Corp. issues 1,790 shares of $12 par common stock at $17...
1. Sabas Company has 20,000 shares of $100 par, 2% cumulative preferred stock and 100,000 shares...
1. Sabas Company has 20,000 shares of $100 par, 2% cumulative preferred stock and 100,000 shares of $50 par common stock. The following amounts were distributed as dividends: Year 1: $10,000 Year 2: 45,000 Year 3: 90,000 Determine the dividends per share for preferred and common stock for the first year. a.$2.00 and $0.00 b.$0.00 and $0.10 c.$0.50 and $0.00 d.$0.50 and $0.10 2. When Wisconsin Corporation was formed on January 1, the corporate charter provided for 100,200 shares of...
At December 31, 2019, Shiga Naoya Corporation had the following stock outstanding. 10% cumulative preferred stock,...
At December 31, 2019, Shiga Naoya Corporation had the following stock outstanding. 10% cumulative preferred stock, $100 par, 107,500 shares $10,750,000 Common stock, $5 par, 4,000,000 shares 20,000,000 During 2020, Shiga Naoya did not issue any additional common stock. The following also occurred during 2020. Income from continuing operations before taxes $23,650,000 Discontinued operations (loss before taxes) $3,225,000 Preferred dividends declared $1,075,000 Common dividends declared $2,200,000 Effective tax rate 17 % Compute earnings per share data as it should appear...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT