Reference no: EM133153340

Question - Meghan Markle Co. had a tax rate of 25% and reported net income of $3,400,000 for the fiscal year ended December 31, 2021. The following details are from the balance sheet of Meghan Markle Co.:

Long Term Debt: Bonds Payable, face value $1,000,000 (1,000 bonds at a face value of $1,000 each), issued in 2012, maturing September 30, 2027, 5%, convertible into common shares at the investor's option at the rate of eight shares per $1,000 bond.

Bonds Payable, face value $3,000,000 (3,000 bonds at a face value of $1,000 each), issued in 2010, maturing June 30, 2035, 7%, convertible into common shares at the investor's option at the rate of 30 shares per $1,000 bond.

Shareholders' Equity: Preferred Shares, 800,000 shares outstanding, $0.50 cumulative, convertible into common shares at the rate of one common share for each preferred share.

Common Shares, 1,500,000 shares outstanding

ADDITIONAL INFORMATION: Dividends for the cumulative preferred shares have been declared and paid up to date for all years, including 2021.

Options were granted by the company in 2019 to purchase 30,000 shares at $40 per share. Although no options were exercised during 2021, the average price per common share during 2021 was $50 per share.

There were no issuances of common or preferred shares during the 2021 fiscal year, no conversions of either bonds or preferred shares, and no options were exercised.

Required -

1. Calculate Basic Earnings Per Share (EPS) for 2021.

2. Calculate Diluted Earnings Per Share (EPS) for 2021.