Answer:
XYZ Corporation
a. Basic earnings per share = $6,000,000/1,000,000
= $6.00
b. Diluted earnings per share = $6,000,000/1,010,500
= $5.94
Explanation:
a) Data and Calculations:
Outstanding shares December 31, 2020:
Common stock = 1,000,000 shares
6% Preferred stock = 50,000 shares
Dividends declared:
Preferred $200,000
Common $400,000
Issue of shares during the year:
6% Convertible Bonds = $2,100,000
Each $1,000 bond convertible into = 5 common shares
= $2,100,000/$1,000 * 5 = 10,500
Net income for the year = $6,200,000
Preferred dividend = (200,000)
Available for common stock = $6,000,000 ($6,200,000 - $200,000)
Income tax rate = 25%
