Chapter 19: Earnings per Share
Assignment 19-5
Case A
Time Period
1 January, shares outstanding
1 January to 28 February
1 March, stock dividend
1 March to 31 May
1 June, retired shares
1 June to 31 July
1 November, shares
issued but backdated
to 1 August
(contingency cleared)
1 November to 31 December
Total
Actual
Shares
2,860,000
2,860,000
286,000
3,146,000
(200,000)
2,946,000
Retroactive
Adjustment
Months
Outstanding
Shares
x 1.10
x 2/12 =
524,333
x 3/12 =
786,500
x 2/12 =
491,000
x 5/12 =
1,394,167
3,196,000
400,000
3,346,000
Case B
Time Period
1 January, shares outstanding
1 January to 28 February
1 March, sold add’l shares
1 March to 30 June
1 July, retired shares
1 July to 31 October
1 November, stock dividend
20% (640,000/3,200,000)
1 November to 31 December
Total
Actual
Shares
3,000,000
3,000,000
400,000
3,400,000
(200,000)
3,200,000
Retroactive
Adjustment
Months
Outstanding
Shares
1.20
x 2/12 =
600,000
1.20
x 4/12 =
1,360,000
1.20
x 4/12 =
1,280,000
x 2/12 =
640,000
3,880,000
640,000
3,840,000
Case C
Time Period
1 January, shares outstanding
1 January to 31 December
Actual
Shares
Retroactive
Adjustment
6,950,000
6,950,000
x 1/4*
Months
Outstanding
Shares
x 12/12 = 1,737,500
Total
1,737,500
* Split occurred in the next fiscal year, but before the financial statements were
issued for this year, and thus must be is included for this year.
Assignment 19-18
Earnings
available to
common shareholders
Basic EPS:
Net earnings
Preferred shares (30,000 x $.50)
Weighted
average
number of shares
Earnings
per
Share
$366,000
(15,000)
$351,000
Shares outstanding
150,000 x 6/12
450,000 x 5/12
516,000 (1) x 1/12
75,000
187,500
43,000
305,500
Basic EPS
$1.15
(1) ($600,000/$1,000 x 110) + 450,000
Individual effect:
Preferred shares
Dividend avoided
Shares issued 30,000 x 2
Actual conversion:
Interest avoided
$47,250 x (1-.3)
Shares issued
($600,000/$1,000) x 110 x 11/12
Diluted EPS:
Basic EPS
Preferred shares
Dividend avoided
Shares issued 30,000 x 2
Actual conversion:
Interest avoided
Shares issued
Diluted EPS
15,000
60,000
$0.25
60,500
$0.55
$351,000
305,500
$1.15
15,000
______
366,000
60,000
365,500
1.00
60,500
426,000
$0.94
33,075
33,075
$399,075
Assignment 19-22
Earnings available to
common shareholders
Basic EPS
Net earnings
$600,000
Note: preferred dividends are
already deducted from net earnings _______
600,000
Shares outstanding
48,000* x 3/12
60,000 x 9/12
Weighted average
number of shares
Earnings
per Share
12,000
45,000
57,000
Basic EPS
$10.53
* Bonds: ($1,500,000 / 1,000) x 8 = 12,000; 60,000 – 12,000 = 48,000
Individual effect:
Actual conversion, 12% debentures
Bond interest $48,000 x (1-.4)
Shares 12,000 x 3/12
12% debentures outstanding
Interest
($624,000 - $48,000) x (1-.4)
Shares:
($4,500,000 / $1,000) x 8
12.4% debentures
Interest ($450,000) x (1-.4)
($3,000,000 / $1,000) x 8
28,800
3,000
$9.60
36,000
9.60
24,000
$11.25
345,600
$270,000
The options are anti-dilutive because exercise price is greater than market value. The
individual effect of the 12% debenture items are identical and their order is irrelevant.
The 12.4% debenture is anti-dilutive.
Diluted EPS:
Basic EPS
Actual conversion:
Bond interest
Shares
12% debentures
Interest
Shares
Diluted EPS
600,000
57,000
$10.53
28,800
3,000
345,600
______
$974,400
36,000
96,000
$10.15
Assignment 19-30
Earnings available to
common shareholders
Basic:
Net earnings
Preferred dividends
600,000 x $.20
Weighted average
number of shares
Earnings
per Share
$18,000,000
( 120,000)
$17,880,000
Average shares
3,300,000 x 12/12
3,320,000 (1) x 0/12
Basic EPS
3,300,000
0
$5.42
(1) 10,000 x 2 = 20,000 shares issued on conversion 31 December 20x6
Individual effect of:
1.
Preferred shares
$.20 x 600,000 = $120,000 = $.20
600,000
600,000
2.
Options
Shares issued: 500,000
Shares retired: ($53 x 500,000)/$75 = 353,333
3.
Debentures [($9,000,000 x .10) + ($20,000 x .9)] (1 - .4) = $550,800 = $3.06
(9,000,000 / 100) x 2)
180,000
4.
Debentures, converted
[($1,000,000 x .10) + ($20,000 x .1)] (1 - .4) =
(1,000,000 / 100) x 2)
$61,200
20,000
= $3.06
Earnings available to
common shareholders
Diluted:
Basic, above
Options
Shares issued
Shares retired
Preferred shares
Dividends/Shares
Actual conversion of debentures
Earnings
Shares
Debentures
Interest; Shares
Diluted EPS
Weighted average
number of shares
Earnings
per Share
$17,880,000
3,300,000
$5.42
_________
$17,880,000
500,000
(353,333)
3,446,667
$5.19
120,000
$18,000,000
_600,000
4,046,667
$4.45
61,200
20,000
___550,800
$18,612,000
_180,000
4,246,667
$4.38