Question

Oriole Corporation has 420,000 shares of common stock outstanding throughout 2021. In addition, the corporation has 5,000, 20-year, 10% bonds issued at par in 2019. Each $1,000 bond is convertible into 20 shares of common stock after 9/23/22. During the year 2021, the corporation earned $747,600 after deducting all expenses. The tax rate was 30%.

Instructions
Compute the proper earnings per share for 2018.

Answer 1

Earnings per Share is $1.246 per share

Step-by-step explanation:

Earnings per share (EPS) determines the company's earnings for the number of shares of its stocks. In the case where the EPS is high, then the investors would pay more for the shares of the company.

It is calculated by dividing the Net income after tax by the total number of outstanding common shares. In this question, we will first calculate Net income after tax, as we are provided Net Income before tax. Then we will calculate EPS.

ss

Net income after Tax = 747,600 x (1 - 0.3)

Net income after Tax = $523,320

Earnings per Share = Net Income after Tax / No. of outstanding common shares

Earnings per Share = 523,320 / 420,000

Earnings per Share = $1.246 per share