Posted: 27 Mar 2009 at 00:47 | IP Logged
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Pheepa, Per my understanding :-
Basic EPS = Income available to common shareholders
Weighted average number of common shares outstanding
Per question, Income available to common shareholders = NI = $850,000
Calculation of Weighted average number of common shares outstanding:-
Date Transaction Change in shares Total shares
1/1 Shares o/s 110,000
5/1 Preferred shares
Converted 20,000 130,000
7/1 50% bonds
Converted 15,000 145,000
Now,
Total shares * Period outstanding = weighted average
110,000 4/12 (Jan-Apr) 36,667
130,000 2/12 (May-Jun) 21,667
145,000 6/12(July-Dec) 72,500
Weighted average shares outstanding 130,834
Thus, Basic EPS = 850,000/130,834
= $6.50
Hope it helps !
__________________ Divya - CO State
Passed using Becker Review :
FAR - 04/11/09 - 94
BEC - 05/30/09 - 86
REG - 08/29/09 - 95
AUD - 11/21/09 - 92
Ethics - 2011
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