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EPS Calculations for Moore, Strauch, and Peters Corp.

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6.During 20X7, Moore Corp. had the following two classes of stock issued and outstanding for the entire year:

* 100,000 shares of common stock, $1 par.
* 1,000 shares of 4% preferred stock, $100 par, convertible share for share into common stock.

Moore's 20X7 net income was $900,000, and its income tax rate for the year was 30%. In the computation of diluted earnings per share for 20X7, the amount to be used in the numerator is

a. $896,000
b. $898,800
c. $900,000
d. $901,200

7. Strauch Co. has one class of common stock outstanding and no other securities that are potentially convertible into common stock. During 20X1, 100,000 shares of common stock were outstanding. In 20X2, two distributions of additional common shares occurred: On April 1, 20,000 shares of treasury stock were sold, and on July 1, a 2 for 1 stock split was issued. Net income was $410,000 in 20X2 and $350,000 in 20X1. What amounts should Strauch report as earnings per share in its 20X2 and 20X1 comparative income statements?

20X2 20X1

a. $1.78 $3.50
b. $1.78 $1.75
c. $2.34 $1.75
d. $2.34 $3.50

8. Peters Corp.'s capital structure was as follows:

December 3l

20X8 20X9

Outstanding shares of stock:

Common ll0,000 ll0,000

Convertible preferred l0,000 l0,000

8% convertible bonds $l,000,000 $l,000,000

During 20X9, Peters paid dividends of $3.00 per share on its preferred stock. The preferred shares are convertible into 20,000 shares of common stock. The 8% bonds are convertible into 30,000 shares of common stock. Net income for 20X9 was $850,000. Assume that the income tax rate is 30%. The basic earnings per share for 20X9 is

a. $6.3l
b. $6.54
c. $7.08
d. $7.45

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Solution Summary

This solution is comprised of a detailed explanation and calculation to find earnings per share for three companies.

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EPS
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6.During 20X7, Moore Corp. had the following two classes of stock issued and outstanding for the entire year:

* 100,000 shares of common stock, $1 par.

* 1,000 shares of 4% preferred stock, $100 par, convertible share for share into common stock.

Moore's 20X7 net income was $900,000, and its income tax rate for the year was 30%. In the computation of diluted earnings per share for 20X7, the amount to be used in the numerator is

a. $896,000
b. $898,800
c. $900,000
d. $901,200

To compute for diluted earnings per share, we will divide the net income of 20X7 by the total number of shares, which also ...

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