On December 31, 2015, Berclair Inc. had 400 million shares of common stock and 7

Question

On December 31, 2015, Berclair Inc. had 400 million shares of common stock and 7 million shares of 9%. $100 par value cumulative preferred stock issued and outstanding. On March 1, 2016, Berclair purchased 60 million shares of its common stock as treasury stock. Berclair issued a 4% common stock dividend on July 1, 2016. four million treasury shares were sold on October 1. Net income for the year ended December 31, 2016, was $350 million. Also outstanding at December 31 were incentive stock options granted to key executives on September 13, 2011. The options were exercisable as of September 13, 2015, for 30 million common shares at an exercise price of $35 per share. During 2016, the market price of the common shares averaged $70 per share The options were exercised on September 1, 2016. Required: Compute Berclair's basic and diluted earnings per share for the year ended December 31, 2016. (Enter your answers in millions (i.e., 10,000,000 should be entered as 10).) Numerator | 1 | Denominator | | Earnings per Share Basic EPSS Diluted EPSS 287 I 287

Explanation / Answer

Ans Basic EPS Net Income-Preferred dividend/weightes avg common stock (350-(7*100*9%))/368.5 0.78 ans weighted avg common stock 1/1-12/31 400*12/12*1.05 420 3/1-12/31 -60*10/12*1.05 -52.5 10-1-12/31 4*3/12 1.0 weighted avg common stock 368.5 Diluted EPS Net Income-Preferred dividend/weightes avg common stock+potentila stock (350-(7*100*9%))/(368.5+15) 0.75 ans Dilutive portion of stock option Stock exercisable (30*35) 1050 Market 1050/70 15 Dilutive portion (30-15) 15

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