Question

Ahnberg Corporation had 720,000 shares of common stock issued and outstanding at January 1. No common shares were issued during the year, but on January 1, Ahnberg issued 340,000 shares of convertible preferred stock. The preferred shares are convertible into 680,000 shares of common stock. During the year Ahnberg paid $204,000 cash dividends on the preferred stock. Net income was $2,580,000. What were Ahnberg's basic and diluted earnings per share for the year?

Answer 1

Ahnberg's basic $3.3

Diluted earnings per share for the year $1.69

Step-by-step explanation:

Ahnberg Corporation

Basic EPS = (NI – Pref. Div)/shares

($2,580,000-$204,000)/720,000

=$2,376,000/720,000

=3.3

Diluted EPS – Assumes preferred shares were converted into common shares at the start of the year.

($2,580,000-$204,000)/(720,000+680,000)

=$2,376,000/$1,400,000

=$1.69

Therefore Ahnberg's basic is $3.3 and diluted earnings per share for the year is $1.69