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    Earnings per share - basic and diluted

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    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

    (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 Summary

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