Question

Vent, Inc. reported net income of $770,000 for 2018. Vent sold 15,000 shares of treasury stock acquired in a previous year on July 1 and 15,000 new shares on November 1. At year-end, 180,000 shares were outstanding. Vent had 20,000 shares of $100 par value 7% preferred stock outstanding all year. Vent paid dividends to the preferred shareholders. If each share of preferred stock is convertible into 2 shares of common stock, the diluted earnings per share for 2018 is

Answer 1

diluted earnings is 3.85 per share

Step-by-step explanation:

given data

net income = $770000

sold shares = 15000

new share = 15000

share outstanding = 180000

vent share = 20000

par value = $100

rate = 7%

common stock = 2 share

to find out

diluted earnings

solution

we know here that dilute formula that is

dilute = net income / ( Weighted average for 2018 + vent share × common stock ) .................1

here Weighted average for 2018 = 150000 ×12/12 + 15000×6/12 + 15000×2/12

Weighted average for 2018 = 160000 shares

so from equation 1

dilute = 770000 / ( 160000 + 20000 × 2 )

dilute = 3.85

so diluted earnings is 3.85 per share