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    Eddy Company

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    Hello,

    I am having trouble with my computations, can someone help? I am really lost on the diluted EPS. I have attached a file that shows the problem better.

    Assume that the following data relative to Eddy Company for 2004 is available:
    Net Income $1,400,000

    Transactions in Common Shares Change Cumulative
    Jan. 1, 2004, Beginning number 500,000
    Mar. 1, 2004, Purchase of treasury shares (60,000) 440,000
    June 1, 2004, Stock split 2-1 440,000 880,000
    Nov. 1, 2004, Issuance of shares 120,000 1,000,000

    8% Cumulative Convertible Preferred Stock
    Sold at par, convertible into 200,000 shares of common
    (adjusted for split). $1,000,000

    Stock Options
    Exercisable at the option price of $25 per share. Average
    market price in 2004, $30 (market price and option price
    adjusted for split). 60,000 shares

    Instructions

    (a) Compute the basic earnings per share for 2004. (Round to the nearest penny.)
    (b) Compute the diluted earnings per share for 2004. (Round to the nearest penny.)

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    Solution Preview

    Assume that the following data relative to Eddy Company for 2004 is available:
    Net Income $1,400,000

    Transactions in Common Shares Change Cumulative
    Jan. 1, 2004, beginning number 500,000
    Mar. 1, 2004, Purchase of treasury shares (60,000) 440,000
    June 1, 2004, Stock split 2-1 440,000 880,000
    Nov. ...

    Solution Summary

    This solution is comprised of a detailed explanation to compute the basic earnings per share for 2004.

    $2.19

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