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Ahnberg Corporation had 800,000 shares of common stock issued and outstanding at January 1. No...

Question:

Ahnberg Corporation had 800,000 shares of common stock issued and outstanding at January 1. No common shares were issued during the year, but on January 1, Ahnberg issued 100,000 shares of convertible preferred stock. The preferred shares are convertible into 200,000 shares of common stock. During the year, Ahnberg paid $60,000 cash dividends on the preferred stock.

Net income was $1,500,000.

What were Ahnberg's basic and diluted earnings per share for the year?

What Is Earnings Per Share:

A company's Earnings Per Share is presented at the very bottom of the income statement. This financial metric is very important to investors because it measures precisely how much net income is attributable to every single common share outstanding.

Answer and Explanation:

Basic earnings per share (EPS) = Net income less preferred dividends / Weighted average common shares

= (1,500,000-60,000)/800,000

=$1.80

Diluted EPS = Net income / Weighted average common shares and preferred shares value in common shares

=1,500,000/(800,000 +200,000)

=$1.50


Learn more about this topic:

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How to Calculate Earnings Per Share: Definition & Formula

from Introduction to Business: Homework Help Resource

Chapter 24 / Lesson 14
110K

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