Answer:
Basic Earnings per share = $0.81
Diluted Earnings per share = $0.59
Explanation:
Basic Earnings per share = Earnings Attributable to Holders of Common Stock / Weighted Average Number of Common Stocks
Earnings Attributable to Holders of Common Stock Calculation :
Net income $172,905
Less Preference Dividend (24,000× $50×7%) ($84,000)
Earnings Attributable to Holders of Common Stock $88,905
Weighted Average Number of Common Stocks Calculation :
Common Stocks 1 January 2021 100,000
Add Common Stocks February 28, 2021 13,333
Less Common Stocks September 30, 2021 (3,640)
Weighted Average Number of Common Stocks 109,693
Basic Earnings per share = $88,905 / 109,693
= $0.81
Diluted Earnings per share = Adjusted Earnings Attributable to Holders of Common Stock / Adjusted Weighted Average Number of Common Stocks
Adjusted Earnings Attributable to Holders of Common Stock Calculation :
Net income $172,905
Less Preference Dividend (24,000× $50×7%) ($84,000)
Earnings Attributable to Holders of Common Stock $88,905
Adjusted Weighted Average Number of Common Stocks Calculation :
Weighted Average Number of Common Stocks 109,693
Add incentive stock options 42,000
Adjusted Weighted Average Number of Common Stocks 151,693
Diluted Earnings per share = $88,905 / 151,693
= $0.59
