Thrifty Co. reported net income of $741,000 for its fiscal yearended January 31, 2017. At the beginning of that fiscal year,72,000 shares of common stock were outstanding. On October 31,2016, an additional 39,000 shares were issued. No other changes incommon shares outstanding occurred during the year. Also during theyear, the company paid the annual dividend on the 39,000 shares of5%, $50 par value preferred stock that were outstanding the entireyear.
Required:
a. Calculate basic earnings per share of commonstock for the year ended January 31, 2017. (Round youranswer to 2 decimal places.)
b. If Thrifty Co.'s preferred stock wereconvertible into common stock, diluted earnings per share can alsobe calculated.
True False
Thrifty Co. reported net income of $741,000 for its fiscal yearended January 31, 2017. At the beginning of that fiscal year,72,000 shares of common stock were outstanding. On October 31,2016, an additional 39,000 shares were issued. No other changes incommon shares outstanding occurred during the year. Also during theyear, the company paid the annual dividend on the 39,000 shares of5%, $50 par value preferred stock that were outstanding the entireyear.
Required:
a. Calculate basic earnings per share of commonstock for the year ended January 31, 2017. (Round youranswer to 2 decimal places.)
b. If Thrifty Co.'s preferred stock wereconvertible into common stock, diluted earnings per share can alsobe calculated.
| True | |
| False |
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Amy Dyken, controller at Sweet Pharmaceutical Industries, a public company, is currently preparing the calculation for basic and diluted earnings per share and the related disclosure for Sweetâs financial statements. Below is selected financial information for the fiscal year ended June 30, 2017.
| SWEET PHARMACEUTICAL INDUSTRIES | ||
| Long-term debt | ||
| Notes payable, 11% | $990,000 | |
| 7% convertible bonds payable | 5,080,000 | |
| 11% bonds payable | 6,120,000 | |
| Total long-term debt | $12,190,000 | |
| Shareholdersâ equity | ||
| Preferred stock, 6% cumulative, $50 par value, 95,000 shares authorized, 23,750 shares issued and outstanding | $1,187,500 | |
| Common stock, $1 par, 10,000,000 shares authorized, 1,000,000 shares issued and outstanding | 1,000,000 | |
| Additional paid-in capital | 3,920,000 | |
| Retained earnings | 5,880,000 | |
| Total shareholdersâ equity | $11,987,500 | |
The following transactions have also occurred at Sweet.
| 1. | Options were granted on July 1, 2016, to purchase 180,000 shares at $15 per share. Although no options were exercised during fiscal year 2017, the average price per common share during fiscal year 2017 was $20 per share. | |
| 2. | Each bond was issued at face value. The 7% convertible bonds will convert into common stock at 50 shares per $1,000 bond. The bonds are exercisable after 5 years and were issued in fiscal year 2016. | |
| 3. | The preferred stock was issued in 2016. | |
| 4. | There are no preferred dividends in arrears; however, preferred dividends were not declared in fiscal year 2017. | |
| 5. | The 1,000,000 shares of common stock were outstanding for the entire 2017 fiscal year. | |
| 6. | Net income for fiscal year 2017 was $1,500,000, and the average income tax rate is 40%. |
For the fiscal year ended June 30, 2017, calculate the following for Sweet Pharmaceutical Industries.
1) Basic Earnings Per Share
2) Diluted Earnings Per Share
For the year ended December 31, 2016, Joey Co. reported NetIncome of $800,000. At January 1, 2016 the company had 900,000shares of common stock outstanding. Joey Co. also had $1,000,000 of6% cumulative preferred stock. No preferred dividends were paid in2016 and the preferred stock is non-convertible. The followingchanges in the number of shares occurred during 2016:
April1: Sold60,000 shares of common stock.
May 31: Declared and Distributed a 10% Stock Dividend
July1: Issued 72,000 shares of common stock
Required:
1. | Compute Joey Coâs earnings per share for the year ended December31, 2016. |
2. | Given the facts as presented above, Joey Co would have to reportDiluted EPS at 12/31/2016. TRUE or FALSE [Circle One] |
3) | Explain your answer in part 2 above (brief short answer) |
