# During 2013, Moore Corp. had the following two classes of stock issued and outstanding for the...

## Question:

During 2013, Moore Corp. had the following two classes of stock issued and outstanding for the entire year:

100,000 shares of common stock, $1 par. 1,000 shares of 4% preferred stock,$100 par, convertible share for share into common stock.

Moore's 2013 net income was $900,000, and its income tax rate for the year was 30%. In the computation of diluted earnings per share for 2013, the amount to be used in the numerator is: (a)$896,000

(b) $898,800 (c)$900,000

(d) $901,200 ## Earnings per share: Earnings per share are the number of profits that a company earns which is attributed to common shareholders. The ratio tests the quality of a company?s earnings. ## Answer and Explanation: #### The company is (a)$896,000.

Diluted earnings per share is calculated by subtracting net income from preferred dividends and then dividing the result by the weighted average shares of stock outstanding.

• (1,000 shares x $100 par) x 4% =$4,000 preferred stock dividends
• \frac\{($900,000 -$4,000)}{100,000}
• $896,000 profits attributed to common stock / 100,000 shares •$8.96 diluted earnings per share.