Reference no: EM132829673
Questions -
Q1. At January 1, 2020, SWAT corporation had 300,000 common shares outstanding (no preferred issued). On March 1, the corporation issued 45,000 new shares to raise additional capital. On July 1, the corporation declared and issued a 2 for 1 stock split. On October 1, the corporation purchased on the open market 180,000 of its own shares at $ 35 each and retired them.
a. Calculate the weighted average number of common shares outstanding to be used in calculating earnings per share for 2020.
Q2. Schwabisch Hall Corp. provides the following data for calendar 2020:
Net Income $2,400,000
Transaction in common Shares Change Cumulative
Jan 1: Beginning 1,000,000
Mar 1: Purchase of Treasury shares (60,000) 940,000
Jun 1: Shares split 2 for 1 940,000 1,880,000
Nov 1: Issuance of new shares 120,000 2,000,000
8% cumulative convertible preferred shares (no par):
Convertible into 200,000 common shares adjusted for split on June 1 = $1,000,000
Stock Options:
Exercisable at the option price of $25 per share.
Average market price in 2020 was $30 (market price and option price adjusted for split = 60,000 shares
a. Calculate basic earnings per share for 2020.
b. Calculate diluted earnings per share for 2020.
Q3. Explain why diluted EPS is useful?