Question - On January 1, 2013, Tonge Industries had outstanding 620,000 common shares (par $1) that originally sold for $20 per share, and 7,000 shares of 10% cumulative preferred stock (par $100), convertible into 70,000 common shares.
On October 1, 2013, Tonge sold and issued an additional 20,000 shares of common stock at $38. At December 31, 2013, there were incentive stock options outstanding, issued in 2012, and exercisable after one year for 27,000 shares of common stock at an exercise price of $35. The market price of the common stock at year-end was $53. During the year the price of the common shares had averaged $45.
Net income was $760,000. The tax rate for the year was 40%.
Required: Compute basic and diluted EPS for the year ended December 31, 2013.