Computing Basic and Diluted Earnings per Share During 2015 P

Computing Basic and Diluted Earnings per Share

During 2015, Park Corporation had 100,000 shares of $10 par value common stock and 20,000 shares of 8%, $50 par value convertible preferred stock outstanding. Each share of preferred stock may be converted into three shares of common stock. Park Corporation\'s 2015 net income was $440,000.

Required
a. Compute the basic earnings per share for 2015. (Round answer to two decimal places.)
$Answer

b. Compute the diluted earnings per share for 2015. (Round answer to two decimal places.)
$Answer

Solution

a) Basic earning per share = (440000-80000)/100000 = 3.60 per share

b) Diluted earning per share = 440000/160000 = 2.75 per share

Diluted share = 100000+20000*3 = 160000 Shares