# On December 31, 2016, the financial statements of Hollingsworth Industries included the...

## Question:

On December 31, 2016, the financial statements of Hollingsworth Industries included the following:

 Net income for 2016 $570 million Bonds, payable, 10% convertible into 45 million shares of stocks$200 million Common stock: Shares outstanding on January 1 $350 million Treasury shares purchased for cash on September 1$42 million

Additional data: The bonds payable were issued at par in 2014. The tax rate for 2016 was 40%.

Required: Compute basic and diluted EPS for the year ended December 31, 2016. (Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)

 Numerator / Denominator = Earnings per share Basic __________ / __________ = 0 Diluted __________ / __________ = 0

## Earnings per Share:

Earnings per share are calculated after calculating the net profit of the earnings of the company, It is calculated on the remaining earnings after distributing the preferred share and the same is divided with the weighted average shares (common).

1)

The weighted average number of share = (350 x (12/12)) million + (42 x (4/12)) million

The weighted average number of share = 350 million - (42 x (1/3)) million

The weighted average number of share = (350 - 14) million

The weighted average number of share = 336million

Earning per share = (Net income - Preferred share) / The weighted average number of share =

Earning per share = ($570 million - 0) / 336 million Earning per share (Basic) =$1.70 per share

Calculating Earning per share (Diluted ):

Convertible bonds into shares = 45 million

Interest net of tax not paid = 200 Million x 10% x 60% = 12 million

Weighted share for the diluted EPS = (336 + 45) million = 381 million

Net profit for diluted Earning per share = (570 + 12) million = 582 million

The EPS diluted = (582 / 381) = $1.53 per share Numerator / Denominator = Earnings per share Basic 570 / 336 =$1.70
Diluted 582 / 381 = \$1.53 