Stockholders Equity and Earnings per Share STK-3) Assume that P & P Products had

Question

Stockholders Equity and Earnings per Share

STK-3) Assume that P & P Products had net income of $91, 855 and had 92,623 shares of weighted-average common shares outstanding. They also had 5,000 shares of 8%, $100 par value, non-cumulative preferred stock outstanding.

Required: Calculate the basic earnings per share.

STK-4) Refer to Problem STK-3 above. Assume that P & P Products also had 1,000 convertible bonds, par value of $1000, outstanding. The bonds pay 2% interest annually and mature in 2020. Furthermore, assume that each bond is convertible into 100 shares of $10 par value common stock. The market value of the stock is $12 per share. The marginal tax rate is 30%.

Required: Calculate diluted earnings per share.

Explanation / Answer

Calculation of the basic earnings per share As per AS 20 EPS = Earnings- Preferrence dividend/ No of shares 91855-5000*100*8%/92623 91855-40000/92623 51855/92623 EPS = .5598 Basic Earning per share is $ .5598

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