At December 31,2013,BCD had 700 common shares outstanding.On September 1,2014,an additional 300 common shares were issued.In addition,BCD had $20,000 of 8 percent,convertible bonds outstanding December 31,2013,which are convertible into 400 common shares.No bonds were converted into common shares in 2014.Net income for the year ended December 31,2014,was $6,000.Assuming the income tax rate was 50 percent,what should be the basic earnings per share for the year ended December 31,2014?

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Quizplus · Accepted Answer

Basic earnings per share = Net income / Weighted average number of shares outstandingWeighted average number of shares outstanding = (700 shares * 12 months + 300 shares * 4 months) / 12 months= (8,400 shares + 1,200 shares) / 12 months= 9,600 shares / 12 months= 800 sharesBasic earnings per share = $6,000 / 800 shares= $7.50

At December 31,2013,BCD Had 700 Common Shares Outstanding