Basic and diluted earnings per share calculation

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Reference no: EM1376566

Intermediate corp. has asked for your assistance with their earnings per share evaluation for the year ended 12/31/2012. They provide you with the subsequent information. They had 500,000 shares of stock outstanding on 1/1/2012. The average market value of each share is $25 for 2012. Their total income for 2012 was $1,200,000 and their tax rate is 40percent. On 1^st April they issued 75,000 shares. On 1^st June they acquired 37,500 shares from the open market to use as treasury stock. On November 1 they reissued (sold) 20,000 shares of their treasury stock.

Intermediate has 2,000 stock options outstanding for the whole year. Each option will be exchanged for one share of common stock at an exercise price of $20.

In addition, Intermediate has bonds which were issued at par with a face value of $2,000,000 and a 5 percent interest rate. The bonds were issued on 30^th June, 2012. Each $1,000 bond is convertible into 20 shares of Intermediate common stock.

Intermediate also has 40,000 shares of %6 convertible, cumulative preferred stock ($100 par value) which was outstanding for full year. Each preferred share will be converted into 3 shares of common stock, No preferred dividends have been declared for the present year or the preceding 2 years.

Give basic and diluted earnings per share calculation.

Reference no: EM1376566

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