CSecure httpnewconnectmheducstion.com/fow/connect.htm Cnapter 19 Help Save&Exit;
ID: 2526166 • Letter: C
Question
CSecure httpnewconnectmheducstion.com/fow/connect.htm Cnapter 19 Help Save&Exit; Submit Check my work Anderson Steel Compaly began 2013 with 560,000 shares of common stock oustanding. On March 31, 2018, 160,000 new shares were sold at a price of $55 par sharc. The markct price has risen steadily since that time to a high of $60 persharc at December 31 No other changes shares accurred duning 201a, ard no securities are outstanding thet can becoe conar stock. However, thete are two agreements with otticers of the comoany tor future issuance or common stock. Both apreements relate to compensation arrangements rearhec n 2017 The first agrement grnns to th rnmpany presidMt ? nght tn 44 000 shares at stark Mch year the cloaing market price is at least S53 The agreement begins in 2019 and expires in 2022 The second agreement grants to the controller a right to 49,000 s1arcs of stock If she Is slll with the firm atthe end of 2026. Net Income for 2018 ws $5400000 pont Cook Required: Campute Aderson Sterl Company's hasik and diluted FPS for tha yrar ended Decemher 1, 2018 (Entar your answors in Basic EPS arch Viindows 4: 41@faraExplanation / Answer
Answer
Basic EPS = Net Income / No. of Shares
Net Income = $5,400,000
No. of Shares = Outstanding + New Shares
=560,000 + 160,000 (9/12 Months)
No. of Shares = 680,000 Shares
Basic EPS = $5,400,000 / 680,000 Shares
Basic EPS = $7.94
Diluted EPS
Net Income = $5,400,000
No. of Shares = Outstanding + New Shares + President Shares (Note 1) + Controller Shares
= 560,000 + 160,000 (9/12 Months) + (44,000 Each Year * 4 Years) + 49,000 Shares
No. of Shares = 905,000 Shares
Diluted EPS = $5,400,000 / 905,000 Shares
Diluted EPS = $5.967
Note 1
The President is eligible for 44,000 Shares every year, so while calculating Diluted EPS we will include these shares.