Reference no: EM132918337
Question - The accounting staff at Shanghai Corporation have gathered for you the following information:
The weighted average common shares outstanding for the year ended December 31, 2020, were 270,000.
A 3-for-1 stock split was distributed on February 1, 2020 which has been taken into account in determining the weighted average common shares outstanding.
50,000 Series II options were issued in 2017. The original terms of these options allowed the holder, when the options were issued, to buy three common shares for a total price of $75 for every option held. These options are effective until end of 2024. Terms of the options do not reflect the effects of the stock split in February.
Shanghai has 10.5% $4,000,000 par-value convertible bonds outstanding since the beginning of the year. Each $1,000 bond was originally convertible into 30 common shares. Terms of the bonds do not reflect the adjustment for the stock split in February. The bonds are convertible at any time before their maturity date in 2028.
Shanghai had issued cumulative, non convertible preferred shares in 2016 with a nominal value of $1,000,000 and having a dividend rate of 5%. No dividends were paid either last year of this year.
Net income in 2020 was $860,000.
The tax rate was 40% and the average common share price in 2020, after being adjusted for the split, was $12.50.
Other additional information also provided included the following:
280,000 common shares were sold for cash on March 1, 2020.
Shanghai purchased and retired 40,000 common shares on June 1, 2020.
Required -
1. Identify all potentially dilutive securities and for each security so identified, determine the incremental contribution to EPS and state if the security is dilutive or antidilutive .
2. Determine the basic and diluted earnings per share to be reported for 2020, showing your computations in a well formatted schedule.
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