# Basic / Diluted EPS

Assume that the following data relate to Bear Creek, Inc. for the year 2004:

(TCO A)

Net income (30% tax rate) $3,200,000

Average common shares outstanding 2004 1,000,000 shares

10% cumulative convertible preferred stock:

Convertible into 80,000 shares of common $1,600,000

8% convertible bonds; convertible into 75,000

shares of common $2,500,000

Stock options:

Exercisable at the option price of $25 per share;

average market price in 2004, $30 90,000

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.)

https://brainmass.com/business/accounting/basic-diluted-eps-255662

#### Solution Preview

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

Basic earnings per share = (Net Income - Preferred dividends)/Number of common shares

Net Income = 3,200,000

Preferred dividends = 1,600,000X10%=$160,000

Number of common shares = 1,000,000

Basic earnings per share = (3,200,000-160,000)/1,000,000 = $3.04

(b) Compute the diluted earnings per share for ...

#### Solution Summary

The solution explains how to calculate the basic and diluted earnings per share