During Year 2, ABC Inc.reported net income of $2,800,000.The company had no preferred shares outstanding.At the start of Year 2, the company had 100,000 stock options outstanding, half of which were exercised on April 1st, Year 2.The exercise price of the option was $10 per share, and the average market price was $12.50 per share.
On May 1, Year 2, the company issued $2,500,000 worth of 10% debentures, 60% of which were converted into 60,000 common shares on July 1, Year 2.The bonds that were not converted were convertible into 40,000 common shares.The company had 1,000,000 shares outstanding at the start o Year 2 and is subject to a tax rate of 25%.
Required: Compute the company's basic and fully diluted EPS figures for year 2.

Question

Quizplus · Accepted Answer

The Answer of During Year 2, ABC Inc.reported net income of $2,800,000.The company had no preferred shares outstanding.At the start of Year 2, the company had 100,000 stock options outstanding, half of which were exercised on April 1st, Year 2.The exercise price of the option was $10 per share, and the average market price was $12.50 per share.
On May 1, Year 2, the company issued $2,500,000 worth of 10% debentures, 60% of which were converted into 60,000 common shares on July 1, Year 2.The bonds that were not converted were convertible into 40,000 common shares.The company had 1,000,000 shares outstanding at the start o Year 2 and is subject to a tax rate of 25%.
Required: Compute the company's basic and fully diluted EPS figures for year 2.