Question - Diluted EPS Problem
Net income for the Zipper Company in 2013 was $1,400,000.
Zipper issued in 2012, at par, 75, $1,000, 8% bonds, each convertible into 100 shares of common stock.
Zipper issued in 2011, 40,000 shares of 6% convertible, cumulative preferred stock, $100 par value. Each share is convertible into 1 share of common stock.
Zipper had outstanding 1,000 options issued during 2012, each exercisable for one share at $8. None has been exercised. The average market price of the stock during 2013 was $20.
Zipper's tax rate is 40%.
Date Event Shares outstanding
Jan 1, 2013 Beginning balance 180,000
March 1 Issued 60,000 shares
June 1 Purchased 78,000 treasury stock
Nov 1 Issued 120,000 shares
Nov 15 Issued 2 for 1 stock split
Required:
Calculate Basic and Dilutive Earnings per Share (show all calculations)
Use the treasury stock method for the options (if necessary).