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  3. . the following information pertains to feyenoord,

. The following information pertains to Feyenoord, Inc.: Net income for the year 2019 equals $...

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Accounting

. The following information pertains to Feyenoord, Inc.:

  1. Net income for the year 2019 equals $ 360,000.
  2. Since the beginning of year, $200,000 of convertible bonds(issued at par) were outstanding. Each of the 200, $1,000 bonds canbe converted into 50 shares of common stock for the next 10 years.None of these bonds were converted during the year.
  3. Since the beginning of the year, stock warrants wereoutstanding to buy 16,000 shares of common stock at $10 per share.None of these warrants were exercised during the year.
  4. During the entire year, 200,000 shares of $5 par common stockwere outstanding.
  5. Feyenoord's income tax rate for the year is 30%.
  6. The average market price for common stock during 2019 was$16.

Compute basic and diluted earnings per share for the year2019.

Answer & Explanation Solved by verified expert
3.8 Ratings (667 Votes)

1. Basic Earning Per Share = Net Income / common stock outstanding

                                            = 360000 / 200000

                                            = $1.8 per share

2. Dilluted Earning Per share = (Net Income - (Bond Interest)*(1-Tax))                                                                

                                                  (Weighted average Common stock + Converted bonds + Conveted Warants)

                                               

                                               = (360000 - (200000*0%)*(0.7))                                   

                                                   (200000 + 10000 + 6000)

                                               = (360000 - 0)   

   216000

= $1.67 per share

Warrants = (16000 - (16000*10/16)) = 6000

Converted Bonds = 200*50 = 10000            

Since interest rate not given for bond, hence interest shown zero.
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