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Earnings per share - basic and diluted

Assume that the following data relative to Eddy company for 2004 is available:

Net Income: $1,400,000

Transactions in Common shares change cumulative
1/1/04, beginning number 500,000
3/1/04 (60,000) 440,000
6/1/04 440,000 880,000
11/1/04, 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) 600,000 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.)

Solution Summary

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

$2.19