Reference no: EM132728056
Question - The following data are presented by Packers Corp. for calendar 2020:
Net income $4,500,000
Weighted average common shares outstanding 1,000,000
10%, non-cumulative preferred shares, convertible into 120,000 common shares $1,600,000
8% convertible bonds; convertible into 105,000 common shares $7,500,000
360,000 call options exercisable at $ 25 per share
Additional information
1. The common and preferred shares and the convertible bonds were outstanding from the beginning of the year.
2. No dividends were declared in 2019.
3. The average market price of the common shares in 2020 was $ 30.
4. The convertible bonds were sold at par.
5. The income tax rate for 2020 is 30%.
6. For simplicity, ignore the requirement to record the debt and equity components of the convertible bonds separately.
Instructions -
a. Calculate basic earning per shares (EPS).
b. In proper format, make a schedule to calculate the fully diluted earnings per share (EPS) for the year ended December 31, 2020. Show all your calculations and round the EPS to four decimal points.
c. Briefly explain anti-dilutive EPS and how does it impact your reporting?
d. Briefly discuss the usefulness of the EPS measure in general. What is the additional importance of reporting diluted EPS?