Posted: August 30th, 2016
Calculate basic EPS, and explain the EPS effect of convertible preferred
Thrifty Co. reported net income of $465,000 for its fiscal year ended January 31,
2011. At the beginning of that fiscal year, 200,000 shares of common stock were outstanding. On October 31, 2010, an additional60,000 shares were issued. No other changes in common shares outstanding occurred during the year. Also during the year the company paid the annual dividend on the 25,000 shares of 7%, $40 par value preferred stock that were also outstanding the entire year.
a. Calculate basic earnings per share of common stock for the year ended January 31, 2011.
b. If Thrifty Co.’s preferred stock were convertible into common stock, what additional calculation would be required?
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