Question: Information from the financial statements of Ames Fabricators, Inc., included the following: &nbs...

Information from the financial statements of Ames Fabricators, Inc., included the following:

	December 31
		2021			2020
Common shares		100,000			100,000
Convertible preferred shares (convertible into 92,000 shares of common)		36,000			36,000
8% convertible bonds (convertible into 30,000 shares of common)	$	1,000,000		$	1,000,000

Amess net income for the year ended December 31, 2021, is $900,000. The income tax rate is 25%. Ames paid dividends of $5 per share on its preferred stock during 2021. Required:

Compute basic and diluted earnings per share for the year ended December 31, 2021. (Enter your answers in thousands (For example, 100,000 should be entered as 100). Do not round intermediate calculations.)

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  1. Basic earnings per share = (Net income - preferred dividend) / Weighted average no. of Common shares outstanding

  =(900000-36000*5)/100000 shares

  = $7.20 per share

  2.After tax saving on interest = total bonds value x interest rate x (1- tax rate)

  =1,000,000*8%*(1-0.25)

  = $60,000

  Diluted earnings per share = (Net income +After tax savings) / Total Weighted average no. of shares

  =(900000+60000)/(100000+92000+30000)

  = $4.32 per share