A20-14 Basic and Diluted EPS The following information relates to Willowdale Ltd.’s financial statements for the year...

4.0 Ratings (648 Votes)

Ques 1 BASIC EPS
	No.	time	w.avg
Beginning balance	450000	12/12	450000
additional	100000	3/12	25000
total w. avg shares			475000

Net income	$ 1,500,000
less:preference dividend	$ (250,000)
(50000*5)
net income attributable to common stockholders	$ 1,250,000

Basic EPS =1250000/475000=	$ 2.63


Ques 2
so we have dilutive EPS of	$ 2.27

first we see the indivifual effect

options:
potential shares issued	50000
shares retired (50000*5)/20	12500
	37500

Bond
interest avoided
(80000)*(1-0.25)	60000
shares issued	65000


now we caluclate diluted EPS

Basic EPS	1250000	475000	$ 2.63
Options:		50000
		-12500
Effect (1)	1250000	512500	$ 2.44

Bond
interest avoided	60000
share issued		65000
Effect (2)	1310000	577500	$ 2.27

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