Answer:Basic Earnings per share =0.93
Diluted Earnings per share = 0.83
Explanation:
basic earnings per share = (net income - preferred dividends) / weighted average stocks
Net income $180,905
Less Preference Dividend (30,000× $50×7%) ($105,000)
Attributable to Holders of Common Stock $75,905
Also, Weighted Average Number of Common Stocks is given as
Common Stocks 1 January 100,000
(outstanding sharesx 12/12)
add common Stocks September 30, 2021 1,500
(sold 6000 treasury stocks x 3/12)
less Common Stocks February 28, 2021 (20,000)
(purchased -24,000 treasury stocks x 10/12 )
Weighted Average Number of Common Stocks 81,500
Basic Earnings per share = $75,905/ 81,500 =0.93
B)
Diluted earnings per share = (net income - preferred dividends) / (weighted average stocks + diluted stocks) =
Net income $180,905
Less Preference Dividend(30,000× $50×7%) (($105,000)
Earnings To Holders of Common Stock $75,905
Also, Adjusted Weighted Average Number of Common Stocks
Weighted Average Number of Common Stocks 81,500
Add
diluted stocks = [($50 - $40) / $50] x 50,000 = 10,000
Adjusted Weighted Average Number of Common Stocks 91,500
Diluted Earnings per share = $75,905 /91,500 =0.83
