Check my work 6 Brief Exercise 19-15 EPS; convertible preferred shares [L019-9]
ID: 2430890 • Letter: C
Question
Check my work 6 Brief Exercise 19-15 EPS; convertible preferred shares [L019-9] Ahnberg Corporation had 660,000 shares of common stock issued and outstanding at January 1. No common shares were issued during the year, but on January 1, Ahnberg issued 280,000 shares of convertible preferred stock. The preferred shares are convertible into 560,000 shares of common stock. During the year Ahnberg paid $168,000 cash dividends on the preferred stock. Net income was $1,950,000. points Skipped What were Ahnberg's basic and diluted earnings per share for the year? (Round your answers to 2 decimal places.) eBook Print References Basic EPS Diluted EPSExplanation / Answer
As no common shares were issued during the year, Weighted average number of common shares outstanding during the year = 660,000
Basic EPS = (Net income - Preferred dividends) / Weighted average number of common shares outstanding.
= (1,950,000 - 168,000) / 660,000
= 2.7
If the preferred shares had been converted at the beginning of the year, 168,000 in preferred dividends would not have been paid and there would have been 560,000 additional common shares.
Diluted EPS = Net Income / Number of common shares
= 1,950,000 / (660,000+560,000)
= 1.60
Basic EPS 2.7 Diluted EPS 1.60