The following information relates to the Zipo Company. Computeboth basic and diluted EPS for Zipo Company. Hint: solving thisproblem is very similar to the steps used to solve the“comprehensive example” problem in the Appendix to the chapter. Allsupporting calculations are to be turned in with the solution.Student groups are encouraged to meet in the classroom during thescheduled class time to work together. Each student is to turn inhis/her solution.
- The Company’s net income for the year was $50,000.
- The weighted-average number of common shares outstanding is10,000 shares.
- The income tax rate is a flat 40%.
- Series A Options to purchase 1,000 shares of common stock at $8per share were outstanding all year.
- Series B Options to purchase 2,000 shares of common stock at$13 per share were outstanding all year.
- The average market price of common stock during the year was$10.
- The Company had two hundred 7% convertible bonds outstandingthe entire year. Each $1,000 bond converts into 40 common shares.The bonds had been issued at par and no bonds were converted duringthe year.
- The Company had 1,000 shares of $100 par value, 4% convertiblecumulative preferred stock issued and outstanding the entire year.Each preferred share is convertible into 1.25 shares of commonstock. The preferred stock was issued at par value and no shareswere converted during the year.
- The Company had 1,000 shares of $100 par value, 6%non-cumulative, nonconvertible preferred stock issued andoutstanding the entire year. The preferred stock was issued at parvalue.
- All required preferred dividends were declared and paid duringthe year as well as a $2 per share dividend to the commonstock.
