Bramble Inc. had net income for the current year ending December 31, 2017 of $1,

Question

Bramble Inc. had net income for the current year ending December 31, 2017 of $1,075,800. During the entire year, there were 503,000 common shares outstanding. The company had two classes of preferred shares outstanding: the Class A preferred shares were $2.23 cumulative shares of which 11,000 were outstanding, and were convertible to common shares at a rate of 1:1. There were 105,000 $5.23 Class B non-cumulative preferred shares outstanding that were also convertible at a rate of 1:1. Bramble had outstanding a $1,000,000, 7% bond issued in 2009 that was convertible to 21,000 common shares. The company also had outstanding a $1,000,000, 6% bond issued in 2010 that was convertible to 25,000 common shares. No dividends were declared or paid this year. Bramble’s tax rate is 38%.

Calculate Basic earnings per share

Bramble Inc. had net income for the current year ending December 31, 2017 of $1,075,800. During the entire year, there were 503,000 common shares outstanding. The company had two classes of preferred shares outstanding: the Class A preferred shares were $2.23 cumulative shares of which 11,000 were outstanding, and were convertible to common shares at a rate of 1:1. There were 105,000 $5.23 Class B non-cumulative preferred shares outstanding that were also convertible at a rate of 1:1. Bramble had outstanding a $1,000,000, 7% bond issued in 2009 that was convertible to 21,000 common shares. The company also had outstanding a $1,000,000, 6% bond issued in 2010 that was convertible to 25,000 common shares. No dividends were declared or paid this year. Bramble’s tax rate is 38%.

Calculate Basic earnings per share

Explanation / Answer

EPS = Net Income - Preferrred Dividend/ Shares Outstanding Net Income $1,075,800.00 Less: Dividend Class A Preferred Shares Cumulative ($2.23 x 11000) $24,530.00 Less: Dividend Class B Preferred Shares Non Cumulative = $5.23 x 105,000 $549,150.00 Net Income after preferred Dividend $502,120.00 EPS = $502,120/ 503,000 shares $0.9983 Assuming preferred shares are not yet converted into common stock

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