question archive EPS Calculations Solve BOTH EPS (Earnings Per Share) questions below QUESTION #1) Stanley Department Stores reported net income of $720,000 for the year ended December 31, 2021
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EPS Calculations
Solve BOTH EPS (Earnings Per Share) questions below
QUESTION #1)
Stanley Department Stores reported net income of $720,000 for the year ended December 31, 2021. |
Additional Information: |
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Common shares outstanding at Jan. 1, 2021 |
80,000 |
Incentive stock options (vested in 2020) outstanding throughout 2021 |
24,000 |
(Each option is exercisable for one common share at an exercise price of $37.50) |
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During the year, the market price of Stanley’s common stock averaged $45 per share. |
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On Aug. 30 Stanley sold 15,000 common shares. |
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Stanley’s only debt consisted of $50,000 of 10% short term bank notes. |
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The company’s income tax rate is 40%. |
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Required: |
Compute Stanley’s basic and diluted earnings per share for the year ended December 31, 2021 |
QUESTION #2)
Information from the financial statements of Ames Fabricators, Inc., included the following: |
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December 31 |
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2021 |
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2020 |
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Common shares |
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100,000 |
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100,000 |
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Convertible preferred shares |
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12,000 |
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12,000 |
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10% convertible bonds |
1,000,000 |
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1,000,000 |
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Ames’s net income for the year ended December 31, 2021, is $500,000. The income tax rate is 40%. 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. |