Information from the financial statements of Barstow Industries included the fol
ID: 2481923 • Letter: I
Question
Information from the financial statements of Barstow Industries included the following at December 31, 2014: Common shares outstanding, $1 par $620,000 8%, noncumulative, non-convertible preferred stock $250,000 During 2015, Barstow had the following stock transactions: Feb. 28 66,000 common shares sold May 15 5% common stock dividend declared and issued Jul 01 2,500 shares repurchased to be held in Treasury Stock, already adjusted for stock dividend Dec. 31 $2,100,000 net income for the year 30% income tax rate As part of an incentive compensation plan, Barstow granted incentive stock options to division managers at December 31 of two prior years. Each option permits its holder to buy one share of common stock at an exercise price equal to market value at the date of grant and can be exercised one year from that date. Information concerning the number of options granted and common share prices follows: Date Granted Options Granted Share Price (adjusted for the stock dividend) Dec. 31, 2013 8000 $24.00 Dec. 31, 2014 3200 $34.00 The market price of the common stock averaged $32 per share during 2014. On July 12, 2012, Barstow issued convertible bonds at face value. Information related to this bond is given below: Face value $800,000.00 State rated of interest 9% Each $1,000 bond is convertible into 30 common shares (adjusted for the stock dividend) Required: Compute Barstow's basic and diluted earnings per share for the year ended December 31, 2015. Information from the financial statements of Barstow Industries included the following at December 31, 2014: Common shares outstanding, $1 par $620,000 8%, noncumulative, non-convertible preferred stock $250,000 During 2015, Barstow had the following stock transactions: Feb. 28 66,000 common shares sold May 15 5% common stock dividend declared and issued Jul 01 2,500 shares repurchased to be held in Treasury Stock, already adjusted for stock dividend Dec. 31 $2,100,000 net income for the year 30% income tax rate As part of an incentive compensation plan, Barstow granted incentive stock options to division managers at December 31 of two prior years. Each option permits its holder to buy one share of common stock at an exercise price equal to market value at the date of grant and can be exercised one year from that date. Information concerning the number of options granted and common share prices follows: Date Granted Options Granted Share Price (adjusted for the stock dividend) Dec. 31, 2013 8000 $24.00 Dec. 31, 2014 3200 $34.00 The market price of the common stock averaged $32 per share during 2014. On July 12, 2012, Barstow issued convertible bonds at face value. Information related to this bond is given below: Face value $800,000.00 State rated of interest 9% Each $1,000 bond is convertible into 30 common shares (adjusted for the stock dividend) Required: Compute Barstow's basic and diluted earnings per share for the year ended December 31, 2015.Explanation / Answer
Net Income 2100000 Add: Int on bonds(avoidable on conversion) 72000 2172000 Less Tax @ 30% 651600 IAT 1520400 Less: Pref.Div.(250000*8% 20000 Earnings available to Equity holders 1500400 Date Details No.of shares Balance O/ s for Mths. WeightO/s mths./12 Wted. O/s 01/01/15 Op. Bal 620000 620000 12 1 620000 28/2/2015 Sale -66000 554000 10 0.833 461666.7 15/5/2015 Stock dividend 27700 581700 7.5 0.625 363562.5 01/01/15 Stock option 3200 584900 12 1 584900 01/01/15 Converible bond 24000 608900 12 1 608900 800000/1000*30 4.45833 2639029.17 Weighted av. No. of shares O/s= 591932 Diluted EPS= Net Income as above/ Diluted no.ofequity shares 1500400/591932 = 2.535