# Assume that the following data relative to Kane Company for 2015 is available: Net...

## Question:

Assume that the following data relative to Kane Company for 2015 is available:

 Net Income $2,790,000 Transactions in Common Shares Change Cumulative Jan. 1, 2015, beginning number 710,000 Mar. 1, 2015, Purchase of treasury shares (65,400) 644,600 June 1, 2015, Stock split 2-1 644,600 1,289,200 Nov. 1, 2015, Issuance of shares 258,000 1,547,200 8% Cumulative Convertible Preferred Stock  Sold at par, convertible into 220,000 shares of common (adjusted for split)$1,100,000 Stock Options Exercisable at the option price of $25 per share. Average market price in 2015,$30 (market price and option price adjusted for split) 84,000 shares

Compute the diluted earnings per share for 2015.

Diluted earnings per share $_____ ## Diluted Earnings Per Share: Diluted Earnings Per Share is computed by dividing the adjusted income by the weighted average number of shares. The diluted earnings per share are lower than the basic earnings per share. ## Answer and Explanation: Compute diluted EPS as follows: Computation for weighted average number of shares Transactions in Common Shares Change Cumulative (a) Period of outstanding (b) Weighted Number of Shares (a x b) Jan. 1, 2015, beginning number 710,000 2/12 118,333 Mar. 1, 2015, Purchase of treasury shares -65,400 644,600 3/12 161,150 June 1, 2015, Stock split 2-1 644,600 1,289,200 5/12 537,167 Nov. 1, 2015, Issuance of shares 258,000 1,547,200 2/12 257,867 Convertible Preference share 220,000 12/12 220,000 Stock Options Equity Elements 84,000 x ($30-$25) /$30) 14,000 12/12 14,000
Weighted Average Number of Shares (A) 1,308,517
Particulars
Net Income $2,790,000 Add: Savings for preference dividend ($1,100,000 x 8%) $88,000 Adjusted Income (B)$2,878,000
Diluted EPS (B/A) \$2.20