Question

Lakeview Corporation had 100,000 shares of common stock outstanding and 200,000 shares of 10% preferred stock that are convertible into 150,000 common shares. Net income for the current year was $500,000 with a 25% tax rate. What is the amount of the diluted EPS for the current year?

Answer 1

Answer:

• What is the amount of the diluted EPS for the current year?

Diluted EPS  $2,00  

Explanation:

Diluted EPS is calculated by dividing the net income of the company by the potential Total Common Shares of the company, in this case the total outstanding common shares plus the total convertible preferred stock into 150,000 common shares, totaled  250,000 Common Shares.

100,000   Common Shares  

150,000   Preferred Stock as Common

250,000  Total Common Potential Shares

$500,000 Net income

     $2,00  Diluted EPS