Homework SourseThe information below pertains to Bridgeport Company for 201
The information below pertains to Bridgeport Company for 2018.
There were no changes during 2018 in the number of common shares, preferred shares, or convertible bonds outstanding. There is no treasury stock. The company also has common stock options (granted in a prior year) to purchase 74,200 shares of common stock at $20 per share.
(a) Compute basic earnings per share for 2018.
(b) Compute diluted earnings per share for 2018.
| Net income for the year | $1,210,000 | |
| 7% convertible bonds issued at par ($1,000 per bond); each bond is convertible into 30 shares of common stock | 2,000,000 | |
| 6% convertible, cumulative preferred stock, $100 par value; each share is convertible into 3 shares of common stock | 4,080,000 | |
| Common stock, $10 par value | 6,130,000 | |
| Tax rate for 2018 | 40% | |
| Average market price of common stock | $25 per share |
Solution
Net income for the year : 1210000
Tax rate :. 40%
Income after tax. :. 726000
Preference dividend: . 244800
Income to equity share holders 481200
No of shares outstanding : . 613000
Basic earnings per share : 0.78
Dillutive earnings per share:
No of shares outstanding plus no of dillutive shares i.e. convertable.
613000+2000*30+40800*3+74200 = 869600
Dillutive earnings per share : 481200/869600 = 0.55
