At December 31, 2013, GHI had 400 common shares outstanding.On October 1, 2014, an additional 100 common shares were issued.In addition, GHI had $40,000 of 8 percent, convertible bonds outstanding at December 31, 2013, which are convertible into 225 common shares.No bonds were converted into common shares in 2014.Net income for the year ended December 31, 2014, was $14,000.Assuming the income tax rate was 50 percent, the basic earnings per share for the year ended December 31, 2014, should be: (Rounded to the nearest cent)

Question

Quizplus · Accepted Answer

To calculate basic earnings per share (EPS), use the formula: EPS = (Net Income - Preferred Dividends) / Weighted Average Shares Outstanding. Here, there are no preferred dividends. The weighted average shares are 400 + (100 * 3/12) = 425. EPS = $14,000 / 425 = $32.94.

At December 31, 2013, GHI Had 400 Common Shares Outstanding