Net Income for the year 2014 $8680000
Less tax @
30%
$2604000
After tax Net
income
$6076000
Less Preference Dividend
$2000000
Net Income after Pref
Div $4076000
1.Calculation of the number of shares- It is based on
the assumption that the preferred stocks were converted in
2014
Shares of Common Stock 2650000
Add Converted Preference Shares
$50000000/$1000*20 1000000
Total Number of Shares =3650000
There fore diluted earnings per share in 2014 =
$4076000/3650000
= $1.12
2.Calculation of the number of shares- It is based on
the assumption that no preferred stocks were converted in
2014.
Total Number of shares -2650000
Therefore diluted earnings per share in 2014
=$4076000/2650000
= $1.54
