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Question about Diluted Earning Per Share

I have attached an excel file to see the problem better.

XX Corp. had $900,000 net income in 2004. On January 1, 2004 there were 220,000 shares of common stock outstanding. On April 1, 20,000 shares were issued and on September 1, Birney bought 30,000 shares of treasury stock. There are 30,000 options to buy common stock at $40 a share outstanding. The market price of the common stock averaged $50 during 2004. The tax rate is 40%.

During 2004, there were 20,000 shares of convertible preferred stock outstanding. The preferred is $100 par, pays $7 a year dividend, and is convertible into three shares of common stock.

XX Corp issued $2,000,000 of 8% convertible bonds at face value during 2003. Each $1,000 bond is convertible into 20 shares of common stock.


Compute diluted earnings per share for 2004. Complete the schedule and show all computations.

Net Adjust- Adjusted Adjust- Adjusted
Security Income ment Net Income Shares ment Shares EPS


Solution Summary

The solution explains how to calculate diluted earnings per share. The solution is in an attached excel file.