1,20x1 GUANA CORPORATION CAPITAL STRUCTURE AT JANUARY 1, 20X1 600,000 10% Bonds

Question

1,20x1 GUANA CORPORATION CAPITAL STRUCTURE AT JANUARY 1, 20X1 600,000 10% Bonds Payable, nonconvertible Preferred Stock, $30 par value, 5% cumulative and nonparticipating, no 300,000 dividends in arrears, each share convertible into 2 shares of common stock Common Stock, $2 par value Paid In Capital in Excess of Par, Preferred Stock Paid In Capital in Excess of Par, Common Stock Treasury Stock, Common, 10,000 shares at cost Retained Earnings 20,000 800,000 100,000) 3,500,000 The following attached information is available for the year ending December 31, 20x REQUIRED: Compute basic and diluted earnings per share for the year ending December 31, 20X1, in accordance with generally accepted accounting principles. Show all supporting computations and round all EPS amounts to the nearest cent.

Explanation / Answer

Particulars $ Retained Earnings (Given) 3500000 Add: Income From Continuing Operations 600000 Extraordinary Gain (Pretax) 28571.4 {20000/(1-0.30)} A) 4128571.4 Less: 10% Interest on Bonds 60000 (600000×0.10) 8% Interest on Bonds ((April to December)) 60000 (1000000×0.08×9/12) Preference Dividend 450000 (300000×30×0.05) Loss from discontinued Operations 171428.6 {120000/(1-0.30)} B) 741428.6 Net (A-B) 3387142.9 No. of Shares for Basic EPS = 400000 + 10000-50000+10000- {5000× (7/12)}               =370000 - 2916.7               = 367083.3 Basic EPS = 3387142.9/367083.3                     = 3387142.9/367083.3 Basic EPS =9.2 No. of Shares for Diluted EPS = [400000 + 10000+(1000000×25/1000)+(300000×2)-50000+10000- {5000× (7/12)}]                  = 420000+25000+600000-50000+10000-2916.7                  = 1002083.3 Diluted EPS = 3387142.9/1002083.3    = 3.38

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