[Semiannual]

12/31/20XX Super Inc. had 200,000 shares of cumulative preferred stock authorized, 100,000 shares issued on July 1,20XX, $1 par value, with 12% dividend. It can be converted over the next 3 years to 12,000 shares of common stock. 12/31 Super Inc. did not declare dividend.
1/1/20XX Super had 10,000 shares of common stock outstanding. It was $4 per share. Super issued 6,000 more shares of common stock for cash and equipment. Super Inc. had $136,000 net earnings.


Here is what I did/have:

10,000 + 6,000(6/12) = 13,000

Basic: 136,000-6,000/13,000 = $10
Diluted: 136,000/25,000 = $5.44

Did I do this right?

[rehmanvohra]

12/31/20XX Super Inc. had 200,000 shares of cumulative preferred stock authorized, 100,000 shares issued on July 1,20XX, $1 par value, with 12% dividend. It can be converted over the next 3 years to 12,000 shares of common stock. 12/31 Super Inc. did not declare dividend.
1/1/20XX Super had 10,000 shares of common stock outstanding. It was $4 per share. Super issued 6,000 more shares of common stock for cash and equipment. Super Inc. had $136,000 net earnings.


Here is what I did/have:

10,000 + 6,000(6/12) = 13,000

Basic: 136,000-6,000/13,000 = $10
Diluted: 136,000/25,000 = $5.44

Did I do this right?

It is rather confusing when the dates are mentioned 20XX be it 31/12 or 1/1. When were the 6,000 of the common stock issued?

If I have understood the problem, the break up is:

Common Stock 1/1 --- 10,000 shares
Common stock? - 6,000 shares

12% Preferred Stock 7/1 - 100,000 shares

[Semiannual]

My mistake. The 6,000 common stock issued was on 7/1/20XX when the market value was $7. The problem had 20XX as the year so I assumed everything in the problem is within the same year.