Question

Sunland Company had 203000 shares of common stock, 20100 shares of convertible preferred stock, and $607000 of 10% convertible bonds outstanding during 2021. The preferred stock is convertible into 40100 shares of common stock. During 2021, Sunland paid dividends of $0.56 per share on the common stock and $1.70 per share on the preferred stock. Each $1,000 bond is convertible into 45 shares of common stock. The net income for 2021 was $361000 and the income tax rate was 25%. Basic earnings per share for 2021 is:_____________.
a. $1.57
b. $1.61
c. $1.32
d. $1.52.

Answer 1

Answer:

Option B fits perfectly,$1.61

Explanation:

Basis earnings per share is the total earnings attributable to common stock divided by the weighted average number of common stock in the year.

Earnings attributable to common is net income minus preferred stock dividends

Net income is $361,000

preferred stock dividend=20,100*$1.70=$ 34,170.00  

earnings attributable to common stock=$361,000-$ 34,170=$ 326,830

Weighted average number of common stock is 203,000 shares

basic earnings per share= $326,830/203,000=$1.61

The correct option is B,$1.61