Question

Crane Company had 190000 shares of common stock, 19000 shares of convertible preferred stock, and $1490000 of 4% convertible bonds outstanding during 2021. The preferred stock is convertible into 39000 shares of common stock. During 2021, Crane paid dividends of $0.80 per share on the common stock and $2 per share on the preferred stock. Each $1,000 bond is convertible into 30 shares of common stock. The net income for 2021 was $590000 and the income tax rate was 30%. Basic earnings per share for 2021 is (rounded to the nearest penny)

Answer 1

Basic earnings per share(EPS)=$2.90

Step-by-step explanation:

Earnings per share is the total earnings attributable to ordinary shareholders divided by the number of units of common stock .

It represents profit per unit of stock unit held by common stock holder investor. The higher, the more profitable and the better.

Earnings per share = Earnings attributable to ordinary shareholders / units of common stock

Earnings attributable to ordinary shareholders= Net income after tax - preference dividend

Net Income 2021= $590,000=

Preference Dividend =$2 × 19,000=$38,000

Earnings attributable to ordinary shareholders for 2021=

=$590,000-$38,000=$552,000

Basic Earnings per share=$552,000/190,000 shares=$2.90

Basic earnings per share(EPS)=$2.90