Calculate basic and dilutive earnings per share

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Question - Diluted EPS Problem

Net income for the Zipper Company in 2013 was $1,400,000.

Zipper issued in 2012, at par, 75, $1,000, 8% bonds, each convertible into 100 shares of common stock.

Zipper issued in 2011, 40,000 shares of 6% convertible, cumulative preferred stock, $100 par value. Each share is convertible into 1 share of common stock.

Zipper had outstanding 1,000 options issued during 2012, each exercisable for one share at $8. None has been exercised. The average market price of the stock during 2013 was $20.

Zipper's tax rate is 40%.

Date Event Shares outstanding

Jan 1, 2013 Beginning balance 180,000

March 1 Issued 60,000 shares

June 1 Purchased 78,000 treasury stock

Nov 1 Issued 120,000 shares

Nov 15 Issued 2 for 1 stock split

Required:

Calculate Basic and Dilutive Earnings per Share (show all calculations)

Use the treasury stock method for the options (if necessary).

Reference no: EM131997255

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