On December 31, 2015, Brisbane Company had 100,000 shares of common stock outsta
ID: 2560200 • Letter: O
Question
On December 31, 2015, Brisbane Company had 100,000 shares of common stock outstanding and 34,000 shares of 5%, $50 par, cumulative preferred stock outstanding. On February 28, 2016, Brisbane purchased 28,000 shares of common stock on the open market as treasury stock paying $44 per share. Brisbane sold 6,400 treasury shares on September 30, 2016, for $49 per share. Net income for 2016 was $184,905. Also outstanding during the year were fully vested incentive stock options giving key personnel the option to buy 54,000 common shares at $44. The market price of the common shares averaged $54 during 2016.
Compute Brisbane's basic and diluted earnings per share for 2016
Required:Explanation / Answer
Basic EPS = [$184,905 - (5% x $50 x 34,000)]/[100,000 - (28,000 x 10/12) + (6,400 x 3/12)]
...................= [$184,905 - $85,000] / [100,000 - 23,333 + 1,600]
...................= $99,905 / 78,267
...................= $1.28
Diluted EPS = [$184,905 - (5% x $50 x 34,000)]/[100,000 - (28,000 x 10/12) + (6,400 x 3/12) +(54,000 - 44,000*)]
.....................= [$184,905 - $85,000] / [100,000 - 23,333 + 1,600 + 10,000]
.....................= $99,905 / 88,267
.....................= $1.13
*(54,000 x $44) / $54 = 44,000
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.