Question

38. Primus, Inc., owns all outstanding stock of Sonston, Inc. For the current year, Primus reports net income (exclusive of any investment income) of $600,000. Primus has 100,000 shares of common Page 310stock outstanding. Sonston reports net income of $200,000 for the period with 40,000 shares of common stock outstanding. Sonston also has 10,000 stock warrants outstanding that allow the holder to acquire shares at $10 per share. The value of this stock was $20 per share throughout the year. Primus owns 2,000 of these warrants. What amount should Primus report for diluted earnings per share

Answer 1

DEPS $7.82 per share

Step-by-step explanation:

Diluted Earnings per share is the further modified version of Earnings per share. It is the monetary value of company's earnings per each outstanding share. Diluted earnings per share is calculated by excluding the convertible securities.

Net Income of Primus $600,000

Net Income of Sonston $200,000

Total income attributable to shareholders $800,000

Total Shares after the warrants conversion $105,000

DEPS : 800,000 / 105,000 = $7.82

Warrants conversion:

10,000 warrants *$10 / $20 = 5000 shares