At January 1,2018, Canaday Corporation had outstanding the following securities:

Question

At January 1,2018, Canaday Corporation had outstanding the following securities: 700 million common shares 35 million 8% cumulative preferred shares, $50 par 4% convertible bonds, $3,500 million face amount, convertible into 70 million common shares The following additional information is available On September 1, 2018, Canaday sold 75 million additional shares of common stock. Incentive stock options to purchase 50 million shares of common stock after July 1, 2017, at $10 per share were outstanding at the beginning and end of 2018. The average market price of Canaday's common stock was $20 per share during 2018 Canaday's net income for the year ended December 31, 2018, was $1,516 million. The effective income tax rate was 40%. · Required 1. & 2. Calculate basic and the diluted earnings per common share for the year ended December 31, 2018. (Enter your answers in millions (i.e., 10,000,000 should be entered as 10).) NumeratorDenominatorEarnings per share Basic Diluted

Explanation / Answer

Computation of Basic EPS Numerator (Basic EPS) Net Income 1516 Less: Preferred dividends 35*$50*8% -140 Numerator (Basic EPS) 1376 Denominator (Weighted average no of shares outstanding) Number of Shares o/s 01/01 - 12/31 700*12/12 700 Additional Shares 09/01 - 12/31 75*4/12 25 Weighted average no of shares 725 Basic EPS = 1376/725 $1.90

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