Reference no: EM131920292

Problem - At January 1, 2013 xyz corporation had outstanding the following securities: $1,000,000, 5% cumulative convertible preferred shares, $50 par; each share is convertible into 2 shares of common stock 7% convertible bonds, $2,000,000 face value issued at par ($1,000) per bond. Each bond is convertible into 30 shares of common stock $6,000,000 common stock, $10 par value.

Additional information:

1. On April 1, 2013 xyz purchased 100,000 shares of its common stock treasury stock.

2. 06/30/13 , xyz issued 4% stock dividend

3. On 10/31/13, 50,000 shares of treasury stock were sold

4. Common stock options outstanding as of 12/31/12 and exercisable in 2013 to purchase 40,000 shares at an exercise price of $30

5. The market price of the stock peaked on 10/31/13 at $50 and on 12/31/13 the market price of the stock closed at $30; the average market price of stock during 2013 was $40

6. Net income for the year ended 12/31/13 was 1,500,000.

7. The income tax rate for 2013 was 40%

Required: Calculate basic and diluted EPS.