The Swirlie Company had net income for 2xx9 of $300,000. Beginning balance in $100 par, 8%...

The Swirlie Company had net income for 2xx9 of $300,000. Beginning balance in $100 par, 8% cumulative preferred stock is $1,000,000. No dividends are in arrears. $1,000,000 in 6% convertible bonds are outstanding during the year. Each $1,000 bond is convertible into 2 shares of common stock. Beginning balance in retained earnings is $400,000 Beginning of the year outstanding common stock shares 100,000 Par value is $10 Issued additional shares common stock March 1st 10,000 Received $12 per share Purchased shares of treasury stock on September 1 5,000 Paid $75,000 Issued 2 for 1 stock split on October 17th. Tax Rate is 20% Required: What is diluted earnings per share for the year?

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Expert Solution

1			Change	Final	Period in month	Ratio (period/12)	Average number of outstanding shares (Final*Ratio)
Jan 1 2009	Beginning			100000	2	0.17	16667
Mar 1	New		10000	110000	6	0.50	55000
Sep 1	Purchase		-5000	105000	1.5	0.13	13125
Oct 17	Split	2 for 1	105000	210000	2.5	0.21	43750
					12		128542
	Additional share for the purpose of Dilluted earning per share

	8% convertible preferred stock			10000
	9% Convertible Bond	1000000/1000*2		2000

	Total Additional shares for Dilluted EPS			12000


	Dilluted EPS:

	Net After tax income		300000
	Add: back interest on bond	1000000*6%	60000
	Less: Income Tax 20%	60000*20%	12000
	Net income for Dilluted EPS		348000

	Diluted EPS	348000/(128542+12000 additional share)
	Diluted EPS	2.48

ekkarill92 answered 1 year ago

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