Answer:
The basic EPS is $1.85 and diluted EPS is $1.77 per share
Explanation:
In order to calculate the basic EPS we would have to use the following formula:
basic EPS= Net income-Dividens/weighted average number of shares
basic EPS= $900,000-(40,000 shares*10%*8%)/(400,000*1.1)+(36,000*10/12*1.1)-(9,000*4/12)
basic EPS= $900,000-$32,000/440,000+33,000-$3,000
=$868,000/470,000
basic EPS=$1.85
In order to calculate the diluted EPS we would have to use the following formula:
diluted EPS= Net income-preference Dividend + stock dividend-tax on stock dividend/weighted average number of shares
diluted EPS=$900,000-($400,000*8%)+($100,000*10%)-($100,000*25%)/(400,000*1.1)+(36,000*10/12*1.1)-(9,000*4/12)+(30,000-(30,000*18/20)+50,000
dilutedEPS=$900,000-$32,000+$100,000+25,000/440,000+33,000-$3,000+(30,000-27,000)+50,000
diluted EPS=$928,000/523,000
diluted EPS=$1.77 per share
