Question

Please help me figure out parts A, B, and C. Please show calculations.

P16.7 (LO 4, 5) Groupwork (Computation of Basic and Diluted EPS) Charles Austin of the controller's office of Thompson Corporation was given the assignment of determining the basic and diluted earnings per share values for the year ending December 31, 2021. Austin has compiled the information listed below. 1. The company is authorized to issue 8,000,000 shares of $10 par value common stock. As of December 31, 2020, 2,000,000 shares had been issued and were outstanding. 2. The per share market prices of the common stock on selected dates were as follows. Price per Share July 1, 2020 $20.00 January 1, 2021 21.00 April 1, 2021 25.00 July 1, 2021 11.00 10.50 August 1, 2021 November 1, 2021 December 31, 2021 9.00 10.00 3. A total of 700,000 shares of an authorized 1,200,000 shares of convertible preferred stock had been issued on July 1, 2020. The stock was issued at its par value of $25, and it has a cumulative dividend of $3 per share. The stock is convertible into common stock at the rate of one share of convertible preferred for one share of common. The rate of conversion is to be automatically adjusted for stock splits and stock dividends. Dividends are paid quarterly on September 30, December 31, March 31, and June 30. 4. Thompson Corporation is subject to a 20% income tax rate.

Answer 1

The number of shares used to compute basic earnings per share is 4951000, as calculated below. Dates Shares Fraction Weighted Particulars outstanding outstanding Restatement of year shares Beginning balance Including 5% stock dividends Jan 1- Apr1 $ 21,00,000.00 2 3/12 $ 10,50,000.00 Conversion of preferred stock Apr 1-Jul 1 $ 25,20,000.00 23/12 $ 12,60,000.00 Stock split Jul 1-Aug 1 $ 50,40,000.00 1/12 $ 4,20,000.00 Issued shares for building Aug 1-Nov 1 $ 53,40,000.00 3/12 $ 13,35,000.00 Purchase of treasury stock Nov 1-Dec1 $ 53,16,000.00 2/12 $ 8,86,000.00 Total number of common shares to compute basic earnings per share $ 49,51,000.00 Particulars Amount Number of shares to compute basic per share $ 49,51,000.00 Convertible preferred stock-still outstanding $ 6,30,000.00 =300000*2*1.05 Convertible preferred stock-converted $ 2,10,000.00 -400000*2*1.05*3/12 Number of shares to compute diluted earnings per share $ 57,91,000.00 The number of shares used to compute diluted earnings per share is 5791000. Amount Amount $ 1,15,50,000.00 Particulars After tax net income Preferred stock dividends March 31 (700000*7.5) June 30, Sep 30 And Dec 31 Adjusted net income $ 5,25,000.00 $ 6,75,000.00 $ 12,00,000.00 $ 1,03,50,000.00