Compute Basic and Diluted EPS

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Reference no: EM132755725

Question - Birdwell Corp has the following information available for the year 2020.

1. As of January 1, 2020, there were 500,000 shares of its $1 par common stock authorized, 350,000 shares issued, and 250,000 shares outstanding. The treasury stock on the books at this time was recorded at a cost of $9 per share.

2. The company had convertible bonds outstanding during the entire year. In total, the bonds were convertible into 5,000 shares of common stock. The interest expense incurred on the convertible bonds totaled $120,000 for the year. None of the bonds were converted during the year.

3. There were 15,000 employee stock options granted during the prior year on June 30, 2019 that were scheduled to vest on June 30, 2020. The options had an estimated grant date fair value of $5 and a strike price of $12 per share. The options vested as scheduled on June 30, 2020.

4. On February 1, 2020, Birdwell resold 40,000 shares of treasury stock for $20 per share.

5. On July 1, 2020, all 15,000 options were exercised when the market value of the common stock was $16 per share.

6. On October 1, 2020, the company jointly issued 10,000 shares of cumulative, convertible 8% preferred stock having a par value of $50 along with 20,000 shares of common stock in exchange for a parcel of land. Each share of preferred stock is convertible into 6 shares of Birdwell's common stock. None of the preferred stock were converted in 2020. The market value of the common stock on October 1, 2020 was $12. The land's value had been recently appraised at approximately $900,000.

7. The average market price of Birdwell's common stock during the first six months of the year was $15 and the average market price over the course of the entire year was $17.

8. Net income for the year 2020 was $865,000. The company's statutory tax rate was 21%.

Required -

a. Prepare all necessary equity-related journal entries for the year 2020.

b. Compute Basic and Diluted EPS and identify any antidilutive shares.

Reference no: EM132755725

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