At the beginning of 2019, Microbee Honey Corporation had 90,000 shares of $1.00 par value common stock issued and outstanding. During 2019, the following common stock transactions have taken place: Feb. 1, Issued 40,000 shares at a price of $32 per share. Apr. 1, Declared and distributed a 10% stock dividend. The market price on that date was $36. June 1 Repurchased 16,000 shares for the treasury at a price of $33 per share. Aug. 1 Reissued 5,000 shares from the treasury at a price of $45 per share. Nov. 30 Declared a 2-for-1 stock split. The market price on that date was $56. For 2019, Microbee reported $575,000 of net income. In addition, the company had the following securities outstanding: 22,000 stock options issued at the beginning of the year. The stock options have an exercise price of $15, and none had been exercised as of December 31, 2019. 5,000 shares of $100 par value, 12% cumulative convertible preferred stock. Each share of preferred stock is convertible into 15 shares of common stock. The shares were issued in 2015. There were no dividends in arrears. A dividend was declared and paid during the year. Note: The above option exercise prices and conversion ratios have been adjusted for stock dividends and stock splits that occurred during the year. Microbee has an effective tax rate of 36% and had an average stock price during 2019 of $37 adjusted for stock splits and dividends. Required: Calculate the weighted average number of shares outstanding. Calculate Basic EPS Calculate tentative DEPS for the share options. Calculate the incremental DEPS for the preferred stock. What would MicroBee report for diluted earnings per share for 2019?

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter16: Retained Earnings And Earnings Per Share

Section: Chapter Questions

Problem 23P

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At the beginning of 2019, Microbee Honey Corporation had 90,000 shares of $1.00 par value common stock issued and outstanding. During 2019, the following common stock transactions have taken place:

Feb.	1,	Issued 40,000 shares at a price of $32 per share.
Apr.	1,	Declared and distributed a 10% stock dividend. The market price on that date was $36.
June	1	Repurchased 16,000 shares for the treasury at a price of $33 per share.
Aug.	1	Reissued 5,000 shares from the treasury at a price of $45 per share.
Nov.	30	Declared a 2-for-1 stock split. The market price on that date was $56.

For 2019, Microbee reported $575,000 of net income. In addition, the company had the following securities outstanding:

22,000 stock options issued at the beginning of the year. The stock options have an exercise price of $15, and none had been exercised as of December 31, 2019.

5,000 shares of $100 par value, 12% cumulative convertible preferred stock. Each share of preferred stock is convertible into 15 shares of common stock. The shares were issued in 2015. There were no dividends in arrears. A dividend was declared and paid during the year.

Note: The above option exercise prices and conversion ratios have been adjusted for stock dividends and stock splits that occurred during the year. Microbee has an effective tax rate of 36% and had an average stock price during 2019 of $37 adjusted for stock splits and dividends.

Required:

Calculate the weighted average number of shares outstanding.

Calculate Basic EPS

Calculate tentative DEPS for the share options.

Calculate the incremental DEPS for the preferred stock.

What would MicroBee report for diluted earnings per share for 2019?

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