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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

Stock Options
Exercisable at the option price of \$25 per share. Average
market price in 2004, \$30 (market price and option price

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.)

#### 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.

\$2.49