Question

Ahnberg Corporation had 740,000 shares of common stock issued and outstanding at January 1. No common shares were issued during the year, but on January 1, Ahnberg issued 360,000 shares of convertible preferred stock. The preferred shares are convertible into 720,000 shares of common stock. During the year Ahnberg paid $216,000 cash dividends on the preferred stock. Net income was $2,806,000.What were Ahnberg's basic and diluted earnings per share for the year?

Answer 1

Basic earnings per share is $3.50 and for the year and diluted earnings per share is $1.92

Step-by-step explanation:

In order to calculate the basic earnings per share for the year we would have to use the following formula:

Basic EPS=(Net Income - preferred dividends)/Weighted average shares outstanding

Basic EPS=($2,806,000-$216,000)/740,000

Basic EPS=$3.50 per share

Diluted EPS=Total Income-preferred dividends/(outstanding shares+Diluted Shares)

Diluted EPS=$2,806,000/(740,000+720,000)

Diluted EPS=$1.92 per share

Answer 2

Diluted EPS 1.92

Step-by-step explanation:

Ahnberg Corporation

1

Net income 2,806,000

Less: Preferred Dividends 216,000

Net income for Common Stockholders 2,590,000

Divide by Common shares outstanding 740,000

Basic EPS 3.5

2

Net income 2,806,000

Divide by Common shares deemed outstanding 1,460,000

(740,000+720,000)

Diluted EPS 1.92

Therefore Ahnberg's basic and diluted earnings per share for the year will be 1.92