uestion 1 (25 marks) (a) On 31 December 2016, Mac Limited (\"Mac\") had 700,000
ID: 2517569 • Letter: U
Question
uestion 1 (25 marks) (a) On 31 December 2016, Mac Limited ("Mac") had 700,000 shares of common stock outstanding On 1 April 2017, Mac purchased 96,000 shares of common stock on the open market as treasury stock paying $60 per share. On 1 September 2017, Mac issued 130,000 shares of 2.5%, $90 par cumulative preferred stock, and at the same time declared a 10% stock dividend on common stock. Mac issued 130,000 shares of new common stock on 30 September 2017, for $50 per share, and 2% bonds at par for $560,000. On 31 December 2017, Mac paid a dividend on common stock at $3.0 per share. Net income for 2017 was $407,000. Required: Compute Mac Limited's Basic Earnings per Share (EPS) for 2017. decimal places Answer should be rounded to 2 (10 marks) (b) On 31 December 2016, Donald Limited ("Donald") had the following common stock, convertible preference stock, stock options, and convertible bonds outstanding: . 384,000 shares of common stock 54,000 shares of 596, $100 par, non-cumulative preferred stock (convertible into 98,000 common . shares) . $4,500,000, 6% convertible bonds issued at par. Each $1,000 bond is convertible into 125 shares of common stock As part of an incentive compensation plan, Donald granted stock options to top executive management of the current and each of the previous two years. Each option permits its holder to buy one share of common stock at an exercise price equal to market value at the date of grant Information concerning the number of options granted and common share prices follows Date Granted Number of Options Granted adjusted for the stock dividend 226,000 197,580 320,800 Share Price 1 September 2015 31 May 2016 31 December 2017 90 82 During 2017, the average market price of the common shares was $82 with a closing price of $32 on 31 December 2017. None of the stock options, convertible preferred stock, or convertible bonds we vear re exercised or converted during the Donald issued a 10% common stock dividend on 15 May and paid cash dividends to common and preferred shareholders respectively on 15 November 2017. On 1 March, 2017, Donald issued 64,800 shares of new common stock. Net income for 2017 was $756,000. The income tax rate is 35% Required Compute Donald Limited's Diluted Earnings per Share (EPS) for 2017. Answer should be rounded to Z decimal places (15 marks)Explanation / Answer
As per policy, only one question is allowed to answer at a time, so answering question 1:
Q1)
common stock: 31-Dec-16 700000 1-Apr -96000 1-Sep-17 60400 30-Sep-17 130000 Total CS 794400 prefe stock: 1-Sep-17 130000 Bond: 30-Sep-17 560000 Net Income $407,000 Less: Pref divi ($3,250) 130000*2.5% Net Income to CS $403,750 Basic EPS Net Income to CS / Total CS 403750/794400 =$0.51 per shareRelated Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.