Little, Inc., reported earnings of $162,000 for 2013, and at the end of the year, had...
Little, Inc., reported earnings of $162,000 for 2013, and at the end of the year, had the following securities outstanding:
- 60,000 shares of common stock. (The year-end share price was $25 per share).
- Employee stock options for the purchase of 8,000 common shares at an exercise price of $22 per share. (The options are fully vested).
(a) Calculate the basic earnings per share for Little, Inc. for
2013. Round to two decimal places.
$Answer
(b) Calculate the diluted earnings per share for Little, Inc. for
2013. Round to two decimal places.
Hint - Do not consider the effect of the treasury stock buyback as
this technical issue is not covered in the chapter.
$Answer
Homework Answers
Solution:
(a). Basic EPS for Litttle Inc. for 2013 = (Net income - Preferred stock dividend) / Weighted avg. shrs of common stock outstanding
= ($162,000 - 0) / 60,000
= $2.70
(b). Diluted EPS for Little, Inc. for 2013 = (Net income - Pref. st. dividend) / (Weighted avg. shrs of common stock outstanding + No. of diluted shares)
= ($162,000 - 0) / (60,000+8,000)
= $2.38 (Rounded off )
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