Excercise 16-23 - (b) 1. Earnings for basic earnings per...

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EXERCISE 16-23 (15–20 minutes)(a) 1. Number of shares for basic earnings per share. Dates Outstanding Shares Outstanding Fraction of Year Weighted Shares Jan. 1–April 1 800,000 3/12 200,000 April 1–Dec. 1 1,400,000 9/12 1,050,000 Weighted-average number of shares outstanding 1,250,000 OR Number of shares for basic earnings per share: Initial issue of stock. ........................................... 800,000 shares April 1, 2011 issue (3/4 X 600,000). .................... 450,000 shares Total. .............................................................. 1,250,000 shares 2. Number of shares for diluted earnings per share: Dates Outstanding Shares Outstanding Fraction of Year Weighted Shares Jan. 1–April 1 800,000 3/12 200,000 April 1–July 1 1,400,000 3/12 350,000 July 1–Dec. 31 1,424,000* 6/12 712,000 Weighted-average number of shares outstanding 1,262,000 *1,400,000 + [($600,000 ÷ 1,000) X 40]
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Unformatted text preview: (b) 1. Earnings for basic earnings per share: After-tax net income. .................................... $1,540,000 2. Earnings for diluted earnings per share: After-tax net income. .................................... $1,540,000 Add back interest on convertible bonds (net of tax): Interest ($600,000 X .08 X 1/2). ..................... $24,000 Less income taxes (40%). ............................ 9,600 14,400 Total. ............................................................... $1,554,400 [Note to instructor : In this problem, the earnings per share computed for basic earnings per share is $1.23 ($1,540,000 1,250,000) and the diluted earnings per share is $1.23 (technically $1.232). As a result, only one earnings per share number would be presented.]...
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This note was uploaded on 04/22/2010 for the course ACCT ACC552 taught by Professor Hint during the Spring '09 term at Keller Graduate School of Management.

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Excercise 16-23 - (b) 1. Earnings for basic earnings per...

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