Austin Products reported $350,000 net income for the year with 100,000 outstanding common shares all year.Austin issued 50,000 shares of $100,8% convertible preferred shares on March 1.Each preferred share is convertible into 10 shares of common stock.Determine the numerator for both basic and diluted EPS.

Question

Quizplus · Accepted Answer

The basic EPS numerator is net income minus preferred dividends for the period the preferred shares were outstanding (10 months). For diluted EPS, the preferred shares are assumed converted, so no deduction for dividends.

Austin Products Reported $350,000 Net Income for the Year with 100,000