Question

Swifty Corporation had 210000 shares of common stock, 19400 shares of convertible preferred stock, and $603000 of 9% convertible bonds outstanding during 2021. The preferred stock is convertible into 40700 shares of common stock. During 2021, Swifty paid dividends of $0.54 per share on the common stock and $1.80 per share on the preferred stock. Each $1,000 bond is convertible into 45 shares of common stock. The net income for 2021 was $364000 and the income tax rate was 35%.
Required:
1. Basic earnings per share for 2021 is ___________(rounded to the nearest penny).

Answer 1

Answer:

Earning per share =   $1.40

Explanation:

Earning per share = Income available to ordinary shareholders / Number of shares available                                                                

                                                                                          $

Net Income                                                                    364.000  

Preferred dividend (19,400× 0.54)                                  (34920 )

                                                                                        329,080

Number of shares(see workings)                                    237,135

Earning per share =  $329,080 /237,135 units = $1.39

Number of shares = (603,000/1000)*45  + 210,000 = 237,135  units

Earning per share =   $1.40