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Instructions to teams: make this page the cover sheet to your solution. Staple it to
your solution in the upper left-hand corner. Each team member present and
participating must print and sign his / her name in the space provided below.
Part I
Assume the following information concerning Tulley Company for 2008:
Required: Determine basic and diluted earnings per share for 2008.
Required:
1. Calculate the weighted-average shares outstanding for 2008.
Solution
Part I
Basic EPS
NI available to C/S: $325,000-(1,000*$10*8%) = $324,200
Diluted EPS
Stock Warrants – Dilutive because the exercise price ($18) is less than the
average stock price ($30).
Convertible P/S
If-Converted:
Numerator: 1,000*$10*8% = $800 because no dividend would have
accumulated if they were converted at beginning of year
Denominator: 1,000*10 = 10,000 shares
If-Converted:
Numerator: ($10,000*.07)*(1-.40) = $420
Denominator: 10 * 100 = 1,000 shares
Diluted EPS =
Warrants: $324,200 = $324,200 =$3.26
98,975 + 400 99,375
Part II