Paul Company had 100,000 shares of common stock outstanding on January 1. 2018.

Question

Paul Company had 100,000 shares of common stock outstanding on January 1. 2018. On September 30, 2018, Paul sold 39,000 shares of common stock for cash Paul also had 5,500 shares of convertible preferred stock outstanding throughout 2018 The preferred stock is $100 par, 7%, and is convertible into 3 shares of common for each share of preferred Paul also had 410.9%, convertible bonds outstanding throughout 2018. Each $1,000 bond is convertible into 30 share value Reported net income for 2018 was $210,000 with a 40% tax rate. Common shareholders received S110 per share dividends after s of common stock. The bonds sold originally at face preferred dividends were paid in 2018 Required: Compute basic and diluted earnings per share for 2018. (Round your answers to 2 decimal places.) Earning per Basicshare Diluted

Explanation / Answer

Basi EPS Net Income-preferred stock/weighted avg outstanding common shares Net Income-preferred stock 210000-(5500*100*7%) 171500 weighted avg outstanding common shares 1/1-12/31 100000*12/12 100000 3/1-12/31 39000*3/12 9750 weighted avg outstanding common shares 109750 Diluted EPS Net Income-preferred stock+interest exp after tax/weighted avg outstanding common shares+potensial shares Net Income+interest exp after tax 210000-(410000*9%*60%) 187860 Potential shares Convertibel preferred stodk 16500 5500*3 Convertible bonds 12300 (410*30) weighted avg outstanding common shares+potensial shares 138550 ans Numertaor Denominator EPS in $ Basic 171500 109750 1.56 Dilutive 187860 138550 1.36

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