Convertible noncumulative 6% preferred stock, $100 par issued at $104, 8,000 shares. Each preferred share is convertible into 4 shares of common stock. $800,000
Nonconvertible cumulative 8% preferred stock, $20 par $100,000
Net income, Year 1 $2,000,000
Other information:
Vested, incentive employee stock options, exercisable at $23 per share, 400,000 options outstanding for the entire year.
Vested, incentive employee stock options, exercisable at $14 per share, 300,000 options outstanding for the entire year.
Warrants exercisable at $15 per share, 20,000 warrants outstanding for the entire year.
Preferred dividends were declared and paid at the stated rates. On December 31, Year 1, the price per common share was $22, and the average price for the year was $20. All convertible securities, options, and warrants have been adjusted for the stock dividend. The tax rate is 20%.
The following common shares transactions took place during the year.
|
Date |
Shares transactions |
Number of shares |
|
January 1, Year 1 |
Shares outstanding, |
800,000 |
|
April 1, Year 1 |
Shares issued |
200,000 |
|
June 1, Year 1 |
25% stock dividend issued |
250,000 |
|
October 1, Year 1 |
Treasury shares repurchased |
40,000 |
1. Compute Basic Earnings per Share, showing the number to 4 decimal places.
2. Identify and list the potentially dilutive securities. Note that any security that may require shares to be issued at some point is a potentially dilutive security.
