Compute hanigan manufacturing basic earnings per share

Reference no: EM131791977

Question: Hanigan Manufacturing had 1,800,000 shares of common stock outstanding as of January 1, 2014, and 900,000 shares of 10% noncumulative (nonconvertible) preferred stock outstanding. The following events occurred during 2014:

• On February 28, Hanigan sold 60,000 common shares.

• On May 15, Hanigan issued a 4% common stock dividend and paid cash dividends of $1,200,000 to common shareholders and $225,000 to preferred stockholders.

• On July 1, Hanigan repurchased and retired 6,000 common shares.

• On September 1, Hanigan issued $1,000,000 of convertible 10% bonds for par value. Each $1,000 bond certificate is convertible into 40 common shares. Cash settlement is not permitted.

• Under the terms of a separation agreement with its founder and former owner, Mike Hanigan, the company is obligated to issue Mr. Hanigan an additional 60,000 common shares if 2014 net income exceeds $5 million. No shares were issued as of December 31, 2014.

• Hanigan's net income for 2014 was $6,300,000 and the income tax rate was 40%.

Required: Compute Hanigan Manufacturing's basic and diluted earnings per share for 2014.

Reference no: EM131791977

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