Anderson Steel Company began 2013 with 480,000 shares of common stock outstandin
ID: 2480071 • Letter: A
Question
Anderson Steel Company began 2013 with 480,000 shares of common stock outstanding. On March 31, 2013, 120,000 new shares were sold at a price of $60 per share. The market price has risen steadily since that time to a high of $65 per share at December 31. No other changes in shares occurred during 2013, and no securities are outstanding that can become common stock. However, there are two agreements with officers of the company for future issuance of common stock. Both agreements relate to compensation arrangements reached in 2012. The first agreement grants to the company president a right to 28,000 shares of stock each year the closing market price is at least $63. The agreement begins in 2014 and expires in 2017. The second agreement grants to the controller a right to 33,000 shares of stock if she is still with the firm at the end of 2021. Net income for 2013 was $3,800,000.
Compute Anderson Steel Company's basic and diluted EPS for the year ended December 31, 2013.
Anderson Steel Company began 2013 with 480,000 shares of common stock outstanding. On March 31, 2013, 120,000 new shares were sold at a price of $60 per share. The market price has risen steadily since that time to a high of $65 per share at December 31. No other changes in shares occurred during 2013, and no securities are outstanding that can become common stock. However, there are two agreements with officers of the company for future issuance of common stock. Both agreements relate to compensation arrangements reached in 2012. The first agreement grants to the company president a right to 28,000 shares of stock each year the closing market price is at least $63. The agreement begins in 2014 and expires in 2017. The second agreement grants to the controller a right to 33,000 shares of stock if she is still with the firm at the end of 2021. Net income for 2013 was $3,800,000.
Explanation / Answer
shares price 1/1/2013 480,000 3/31/2013 120,000 60 12/31/2013 600,000 65 rights 28,000 Total shares 628,000 rights 33,000 Net Income 3,800,000 shares outstanding(exc rights) 600,000 Basic EPS 6.33 (3800000/600000) shares outstanding(Inc rights) 628,000 Diluted EPS - 2013 6.05 (3800000/628000)