Earnings per Share: Basic and Diluted
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Use the following information for questions 1 and 2.
Gilley Co. had 200,000 shares of common stock, 20,000 shares of convertible preferred stock, and $1,000,000 of 10% convertible bonds outstanding during 2007. The preferred stock is convertible into 40,000 shares of common stock. During 2007, Gilley paid dividends of $.90 per share on the common stock and $3.00 per share on the preferred stock. Each $1,000 bond is convertible into 45 shares of common stock. The net income for 2007 was $600,000 and the income tax rate was 30%.
1. Basic earnings per share for 2007 is (rounded to the nearest penny)
a. $2.21.
b. $2.42.
c. $2.51.
d. $2.70.
2. Diluted earnings per share for 2007 is (rounded to the nearest penny)
a. $2.14.
b. $2.25.
c. $2.35.
d. $2.46.
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Solution Summary
This solution provides calculations for determining basic earnings per share and diluted earnings per share.
Education
- BA, Ain Shams University, Cairo Egypt
- MBA, California State University, Sacramento
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