Palo Alto Company earned net income of $43,800 during 2013. At the beginning of

Question

Palo Alto Company earned net income of $43,800 during 2013. At the beginning of 2013, it had 10,000 shares of common stock outstanding; an additional 4,000 shares were issued on July 2. During 2013, 600 shares of 8%, $100 par, convertible preferred stock were outstanding the entire year. Dividends on this preferred stock were paid in 2013. Each share is convertible into 5 shares of common stock. The corporate income tax rate is 30%.

Required:

Compute the 2013 diluted earnings per share. If required, round your answer to the nearest cent.

$ per share

I believe the new denominator is 15,000 ((10,000*6/12months)+(14000*6/12mo.)+(600shares*5)).

How do I go about determining how much to increase the numertor by?

Explanation / Answer

Palo Alto Company earned net income of $43,800 during 2013. At the beginning of 2013, it had 10,000 shares of common stock outstanding; an additional 4,000 shares were issued on July 2. During 2013, 600 shares of 8%, $100 par, convertible preferred stock were outstanding the entire year. Dividends on this preferred stock were paid in 2013. Each share is convertible into 5 shares of common stock. The corporate income tax rate is 30%.

diluted earnings per share = 43800/(10000*6/12 + 14000*6/12 + 600*5*12/12)

diluted earnings per share = 43800/15000

diluted earnings per share = 2.92

Answer:

Compute the 2013 diluted earnings per share. If required, round your answer to the nearest cent.

$ 2.92per share

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.