Reference no: EM132464982

Point 1: On June 1, 2018, Indigo Company and Sweet Company merged to form Pharoah Inc. A total of 870,000 shares were issued to complete the merger. The new corporation reports on a calendar-year basis.

Point 2: On April 1, 2020, the company issued an additional 543,000 shares of stock for cash. All 1,413,000 shares were outstanding on December 31, 2020.

Point 3: Pharoah Inc. also issued $600,000 of 20-year, 8% convertible bonds at par on July 1, 2020. Each $1,000 bond converts to 38 shares of common at any interest date. None of the bonds have been converted to date.

Point 4: Pharoah Inc. is preparing its annual report for the fiscal year ending December 31, 2020. The annual report will show earnings per share figures based upon a reported after-tax net income of $1,613,000. (The tax rate is 20%.)

Question 1: Determine the following for 2020.

Problem (a) The number of shares to be used for calculating:

1. Basic Earnings Per Share
2. Diluted Earnings Per Share

Problem (b) The earnings figures to be used for calculating:

1. Basic Earnings Per Share
2. Diluted Earnings Per Share