Captionless Image $4.84. $4.38. $4.52. $4.29.Selected financial data for ABC Company is presented below.
For the year just ended ABC has net income of $5,300,000.
• $5,500,000 of 7% convertible bonds were issued in the prior year at a face value of $1,000. Each bond is convertible into 50 shares of common stock. No bonds were converted during the current year.
50,000 shares of 10% cumulative preferred stock, par value $100, were issued in the prior year. Preferred dividends were not declared in the current year, but were current at the end of the prior year.
• At the beginning of the current year 1,060,000 shares of common stock were outstanding.
On June 1 of the current year 60,000 shares of common stock were issued and sold. • ABC's average income tax rate is 40%.
ABC Company's basic earnings per share for the current fiscal year is: stP
To calculate the basic earnings per share for ABC Company, we need to determine the weighted average number of shares outstanding.
At the beginning of the year, there were 1,060,000 shares outstanding. On June 1, an additional 60,000 shares were issued and sold. Therefore, the weighted average number of shares outstanding for the year is:
(1,060,000 * 12) + (60,000 * 7) = 12,720,000 + 420,000 = 13,140,000
Next, we need to calculate the net income available to common shareholders. Since there were no preferred dividends declared in the current year, the net income available to common shareholders is equal to the net income of $5,300,000.
Finally, we can calculate the basic earnings per share by dividing the net income available to common shareholders by the weighted average number of shares outstanding:
Basic earnings per share = Net income available to common shareholders / Weighted average number of shares outstanding
= $5,300,000 / 13,140,000
≈ $0.403 per share
Therefore, ABC Company's basic earnings per share for the current fiscal year is approximately $0.403 per share.