Question

In: Accounting

Pronghorn Company’s net income for 2020 is $53,200. The only potentially dilutive securities outstanding were 1,000...

Pronghorn Company’s net income for 2020 is $53,200. The only potentially dilutive securities outstanding were 1,000 options issued during 2019, each exercisable for one share at $6. None has been exercised, and 10,700 shares of common were outstanding during 2020. The average market price of Pronghorn’s stock during 2020 was $25.

(a) Compute diluted earnings per share. (Round answer to 2 decimal places, e.g. $2.55.)

(b) Assume the same facts as those assumed for part (a), except that the 1,000 options were issued on October 1, 2020 (rather than in 2019). The average market price during the last 3 months of 2020 was $25. (Round answer to 2 decimal places, e.g. $2.55.)

Solutions

Expert Solution

a)
Proceeds from exercise of 1,000 = 1000 x $6 $  6,000.00
Use the proceeds to purchase treasury = $6000/$25         240.00
Shares issued upon exercise of 1,000      1,000.00
Incremental share increase         760.00
Diluted EPS = Net Income /(Outstnding shares+ incremental shares
Diluted EPS = $53,200/( 10,700 + 760) $         4.64 Per share
b)
Proceeds from exercise of 1,000 = 1000 x $6 $  6,000.00
Use the proceeds to purchase treasury = $6000/$25         240.00
Shares issued upon exercise of 1,000      1,000.00
Incremental share increase         760.00
Weight 3/12
Adj. Incremental share increase         190.00
Diluted EPS = $53,200/( 10,700 + 190) $         4.89 Per share

ekkarill92 answered 1 year ago
Next > < Previous

Related Solutions

Stellar Company’s net income for 2017 is $45,200. The only potentially dilutive securities outstanding were 800...
Stellar Company’s net income for 2017 is $45,200. The only potentially dilutive securities outstanding were 800 options issued during 2016, each exercisable for one share at $6. None has been exercised, and 10,100 shares of common were outstanding during 2017. The average market price of Stellar’s stock during 2017 was $25. (a) Compute diluted earnings per share. (b) Assume the same facts as those assumed for part (a), except that the 800 options were issued on October 1, 2017 (rather...
Carla Vista Corp.’s net income for 2020 is $140,600. The only potentially dilutive securities outstanding were...
Carla Vista Corp.’s net income for 2020 is $140,600. The only potentially dilutive securities outstanding were 1,000 call options issued during 2019, with each option being exercisable for one share at $16. None have been exercised, and 28,700 common shares were outstanding during 2020. The average market price of the company’s shares during 2020 was $20. QUESTIONS: A) Calculate diluted earnings per share for the year ended December 31, 2020. B) Assuming that the 1,000 call options were instead issued...
Computing EPS with Multiple Potentially Dilutive Securities Spencer Inc.'s 2020 earnings of $500,000 reflect a tax...
Computing EPS with Multiple Potentially Dilutive Securities Spencer Inc.'s 2020 earnings of $500,000 reflect a tax rate of 25%. During the year, Spencer had the following securities outstanding: 120,000 shares of common stock. 5,000 shares of 6%, $100 par, nonconvertible, cumulative preferred stock. 5,000 shares of 6%, $100 par, cumulative preferred stock, each convertible into 1.75 shares of common stock. 500 bonds, $1,000 face value, 8% interest, each convertible into 30 shares of common stock (issued at face value). 200...
Computing EPS with Multiple Potentially Dilutive Securities Spencer Inc.'s 2020 earnings of $1,100,000 reflect a tax...
Computing EPS with Multiple Potentially Dilutive Securities Spencer Inc.'s 2020 earnings of $1,100,000 reflect a tax rate of 25%. During the year, Spencer had the following securities outstanding: 240,000 shares of common stock. 10,000 shares of 6%, $100 par, nonconvertible, cumulative preferred stock. 10,000 shares of 6%, $100 par, cumulative preferred stock, each convertible into 1.75 shares of common stock. 1,000 bonds, $1,000 face value, 8% interest, each convertible into 30 shares of common stock (issued at face value). 400...
Pronghorn Company reported 2020 net income of $152,900. During 2020, accounts receivable increased by $13,760 and...
Pronghorn Company reported 2020 net income of $152,900. During 2020, accounts receivable increased by $13,760 and accounts payable increased by $9,604. Depreciation expense was $44,000. Prepare the cash flows from operating activities section of the statement of cash flows. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).) PRONGHORN COMPANY Cash Flow Statement choose the accounting period                                             ...
Exercise 23-06 Pronghorn Company’s income statement for the year ended December 31, 2020, contained the following...
Exercise 23-06 Pronghorn Company’s income statement for the year ended December 31, 2020, contained the following condensed information. Service revenue $848,000 Operating expenses (excluding depreciation) $618,000 Depreciation expense 59,000 Loss on sale of equipment 25,000 702,000 Income before income taxes 146,000 Income tax expense 40,000 Net income $106,000 Pronghorn’s balance sheet contained the following comparative data at December 31. 2020 2019 Accounts receivable $39,000 $57,000 Accounts payable 39,000 32,000 Income taxes payable 4,200 8,900 (Accounts payable pertains to operating expenses.)...
Adcock Corp. had $500,000 net income in 2020. For all of 2020, there were 200,000 shares...
Adcock Corp. had $500,000 net income in 2020. For all of 2020, there were 200,000 shares of Adcock’s common stock outstanding. There were also 30,000 options outstanding all year. Each option allowed the holder to buy one share of common stock at $40 a share. The market price of the common stock averaged $50 during 2020. The tax rate is 30%. During all of 2020, there were 40,000 shares of convertible preferred stock outstanding. The preferred is $100 par, pays...
A company's net income for 2020 is $50,000. It has 2,000 stock options outstanding. These options...
A company's net income for 2020 is $50,000. It has 2,000 stock options outstanding. These options were issued during 2019, each exercisable for one share at $37. None has been exercised. 40,000 shares of common were outstanding during 2020. Suppose the average market price of the company’s stock during 2020 can be 44, 46, 27, or 54. For which average market price will these stock options be antidilutive? Please enter one (and only one) of the average market prices provided...
A company's net income for 2020 is $50,000. It has 2,000 stock options outstanding. These options...
A company's net income for 2020 is $50,000. It has 2,000 stock options outstanding. These options were issued during 2019, each exercisable for one share at $37. None has been exercised. 40,000 shares of common were outstanding during 2020. Suppose the average market price of the company’s stock during 2020 can be 44, 46, 27, or 54. For which average market price will these stock options be antidilutive? Please enter one (and only one) of the average market prices provided...
Pronghorn Corporation had the following portfolio of investments at December 31, 2020, that qualified and were...
Pronghorn Corporation had the following portfolio of investments at December 31, 2020, that qualified and were accounted for using the FV-OCI method: Quantity Percent Interest Cost per Share Fair Value per Share Frank Inc. 2,000 shares 8% $11 $17 Ellis Corp. 5,200 shares 14% 25 20 Mendota Ltd. 4,200 shares 2% 31 25 Early in 2021, Pronghorn sold all the Frank Inc. shares for $18 per share, less a 1% commission on the sale. On December 31, 2021, Pronghorn’s portfolio...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT