Free

80.2K

Verified Solution

Link Copied!

Comprehensive: EPS

Frost Company has accumulated the following information relevantto its 2016 earnings per share.

1. Net income for 2016: $150,500.
2. Bonds payable: On January 1, 2016, the company had issued 10%,$200,000 bonds at 110. The premium is being amortized in the amountof $1,000 per year. Each $1,000 bond is currently convertible into22 shares of common stock. To date, no bonds have beenconverted.
3. Bonds payable: On December 31, 2014, the company had issued$540,000 of 5.8% bonds at par. Each $1,000 bond is currentlyconvertible into 11.6 shares of common stock. To date, no bondshave been converted.
4. Preferred stock: On July 3, 2015, the company had issued 3,800shares of 7.5%, $100 par, preferred stock at $108 per share. Eachshare of preferred stock is currently convertible into 2.45 sharesof common stock. To date, no preferred stock has been converted andno additional shares of preferred stock have been issued. Thecurrent dividends have been paid.
5. Common stock: At the beginning of 2016, 25,000 shares wereoutstanding. On August 3, 7,000 additional shares were issued.During September, a 20% stock dividend was declared and issued. OnNovember 30, 2,000 shares were reacquired as treasury stock.
6. Compensatory share options: Options to acquire common stock ata price of $33 per share were outstanding during all of 2016.Currently, 4,000 shares may be acquired. To date, no options havebeen exercised. The unrecognized compensation cost (net of tax)related to these options is $5 per share.
7. Miscellaneous: Stock market prices on common stock averaged $41per share during 2016, and the 2016 ending stock market price was$40 per share. The corporate income tax rate is 30%.

Required:

1. Compute the basic earnings per share. Round intermediatecalculations to the nearest whole number, then round your finalanswer to two decimal places.
   $ per share
2. Compute the diluted earnings per share. Round intermediatecalculations to the nearest whole number, then round your finalanswer to two decimal places.
   $ per share
3. Indicate which earnings per share figure(s) Frost would reporton its 2016 income statement.
   Choose: (1) Basic EPS only (2) Both basic and diluted EPS (3)Diluted EPS only