Question

During 2016, Moore Corp. had the following two classes of stock issued and outstanding for the entire year: 100,000 shares of common stock, $1 par. 1,000 shares of 4% preferred stock, $100 par, convertible share for share into common stock. Moore's 2016 net income was $900,000, and its income tax rate for the year was 30%. In the computation of diluted earnings per share for 2016, the amount to be used in the numerator is

Answer 1

Answer:

the amount to be used in the numerator is $900,000.

Explanation:

Earnings Per Share = Earnings Attributable to Holders of Common Shares ÷ Weighted Average Number of Common Shares Outstanding.

Diluted Earnings per Share takes into account potential voting rights.

The Preference dividend is not deducted from Net Income as it carries a potential voting right.