Reference no: EM133090462
Question - A. John Corporation in January 2019 had 450,000 shares of no-par common stock issued and outstanding. On June 30, 2019, the firm issued an additional 135,000 shares for $7 per share. The 2019 income was $319,200. On September 1, 2020, a 15 percent stock dividend was issued to all common shareholders. On October 1, 2020, 60,000 shares were reacquired as treasury shares. Net income in 2020 was $278,063.
Required -
i. Compute the weighted-average number of common shares outstanding for 2019 and 2020 that should be shown on comparative statements at the end of 2020.
ii. Compute the basic earnings per share in 2019 and 2020 to be reported on comparative statements at the end of 2020.
B. The following is a partial balance sheet for John Corporation for the year ended December 31, 2020:
9 percent convertible Bonds (issued at par) $1,800,000
Common stock, 180,000 shares issued and outstanding, $50 par 9,000,000
1. Each $1,000 convertible bond can be converted into 80 shares of common stock.
2. On September 1, 2020, one-third of the convertible debt was converted into common stock.
3. John reported net income of $1,550,000 in 2020. The tax rate was 30 percent.
4. No other stock transactions took place during 2020.
Required -
iii. Compute basic earnings per share for 2020.
iv. Compute diluted earnings per share for 2020.
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