A20-14 Basic and Diluted EPS The following information relates to Willowdale Ltd.’s financial statements for the year...

4.0 Ratings (648 Votes)

Ques 1 BASIC EPS
	No.	time	w.avg
Beginning balance	450000	12/12	450000
additional	100000	3/12	25000
total w. avg shares			475000

Net income	$ 1,500,000
less:preference dividend	$ (250,000)
(50000*5)
net income attributable to common stockholders	$ 1,250,000

Basic EPS =1250000/475000=	$ 2.63


Ques 2
so we have dilutive EPS of	$ 2.27

first we see the indivifual effect

options:
potential shares issued	50000
shares retired (50000*5)/20	12500
	37500

Bond
interest avoided
(80000)*(1-0.25)	60000
shares issued	65000


now we caluclate diluted EPS

Basic EPS	1250000	475000	$ 2.63
Options:		50000
		-12500
Effect (1)	1250000	512500	$ 2.44

Bond
interest avoided	60000
share issued		65000
Effect (2)	1310000	577500	$ 2.27

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

•	450,000 common shares, issued for $5.75 million, wereoutstanding.
•	50,000 preferred shares bearing cumulative dividend rights of$5 per year.
•	$1 million (par value) of 5% convertible bonds ($1,000 facevalue), with interest payable on 30 June and 31 December of eachyear. Each $1,000 bond is convertible into 65 common shares, at theoption of the holder, at any time before 31 December 20X1. Interestexpensed on the convertible bonds was $80,000.
•	Outstanding options for 50,000 common shares at a price of $5per share. The average market value of common shares during theperiod was $20.

Other questions asked by students