Question

Colt Corporation purchased Massey Inc. and agreed to give stockholders of Massey Inc. 50,000 additional shares in 2020 if Massey Inc.'s net income in 2019 is $600,000 or more; in 2018 Massey Inc.'s net income is $615,000. Colt has net income for 2018 of $1,500,000 and has an average number of common shares outstanding for 2018 of 500,000 shares. What should Colt report as earnings per share for 2018?Basic EarningsPer Share...Diluted Earnings Per Share1. $3.00...$3.002. $2.73...$2.733. $2.73...$3.004. $3.00...$2.73

Answer 1

Answer:

4. $3.00...$2.73

Explanation:

Basic EPS = Net income/average number of shares outstanding

                 = 1500000/500000

                 = $3 per share

Diluted EPS = 1500000/(500000 + 50000)

                    = $2.73 per share

Therefore, Colt should report earnings per share for 2018:

Basic Earnings Per Share of $3

Diluted Earnings Per Share of $2.73