Brief Exercise 1614 Kingbird Corporation reported net income

Brief Exercise 16-14

Kingbird Corporation reported net income of $256,960 in 2017 and had 47,400 shares of common stock outstanding throughout the year. Also outstanding all year were 5,500 shares of cumulative preferred stock, each convertible into 2 shares of common. The preferred stock pays an annual dividend of $5 per share. Kingbird’s tax rate is 50%.

Compute Kingbird’s 2017 diluted earnings per share. (Round answer to 2 decimal places, e.g. 3.55.)

Skysong Corporation reported net income of $398,120 in 2017 and had 206,000 shares of common stock outstanding throughout the year. Also outstanding all year were 34,500 options to purchase common stock at $11 per share. The average market price of the stock during the year was $15.

Compute diluted earnings per share. (Round answer to 2 decimal places, e.g. 3.55.)

Solution

Calculate diluted Earning per share : Kingbird\'s corporation

Diluted earninng per share = Net income/Adjusted diluted shares

= 256960/(47400+5500*2)

Diluted earning per share = $4.40 per share

Calculate diluted Earning per share : Skysong Corporation

Diluted earninng per share = Net income/Adjusted diluted shares

= 398120/(206000+9200)

Diluted earning per share = $1.85 per share

Diluted share in share option = 34500-(34500*11/15)=9200