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InClassExerciseCh.18 - In‐Class Exercises Chapter 18...

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Unformatted text preview: In‐Class Exercises Chapter 18 Exercise #1 On January 1st, Ajax Inc. had 1,250,000 shares outstanding. During 2011 they have the following events: Date Economic Event February 1 Employees exercised stock options for 10,000 shares March 1 Issued stock dividend of 15% March 1 Issued cash dividend of $0.50 per share July 1 3 for 1 stock split November 1 Purchase 9,000 shares in the open market Ajax has net income of $10,300,000 and paid preferred dividends of $250,000. Required: Calculate basic EPS for Ajax in 2011. Exercise #2 Ajax Company reported net income of $235,200 and has had 100,000 outstanding common shares the entire year. As a result of a merger several years ago, there are options for 20,000 common shares and warrants for 5,000 common shares. The options can be exercised at a strike price of $7.40 and the warrants have a strike price of $7.00. The average stock price this year has been $8.25. Required: Calculate basic EPS Calculate diluted EPS Exercise #3 Ajax Corporation reported net income of $10,250,000 during 2011. During that year they had a weighted average number of shares equal to 4,500,000 shares. Ajax also has 1,250,000 outstanding shares of cumulative 6% preferred stock with $1.00 par value. The preferred shares are convertible to 80,000 shares of common stock. Ajax also has issued three sets of convertible securities as follows: Security Interest Cost (before No. of shares if deducting tax effect) converted A $250,000 125,000 B $1,125,000 425,000 C $750,000 600,000 Ajax has an effective tax rate of 20%. Required: Determine basic EPS Determine diluted EPS ACCT 4050 Page 1 of 3 Chapter 18 ‐ In‐Class Exercises ...
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