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Charles Austin of the controller?s office of Thompson Corporation




Question;Problem 16-7(Computation of Basic and Diluted EPS) Charles;Austin of the controller?s office of Thompson Corporation was given the assignment of determining the basic and diluted earnings per;share values for the year ending December 31, 2013.;Austin has compiled the information listed below;1 1. The;company is authorized to issue 8,107,200 shares of $10 par value common stock.;As of December 31, 2012, 2,026,800;shares;had been issued and were outstanding.;2 The per;share market prices of the common stock on selected dates were as follows.;Price;per Share;01-Jul-12 $20.00;01-Jan-13 $21.00;01-Apr-13 $25.00;01-Jul-13 $11.00;01-Aug-13 $10.50;01-Nov-13 $9.00;31-Dec-13 $10.00;3 A total;of 769,200 shares of an authorized 1,273,200 shares of convertible preferred;stock had been issued on July 1, 2012.;The;stock was issued at its par value of $25, and it has a cumulative dividend of;$3 per share. The stock is convertible into;common;stock at the rate of one share of convertible preferred for one share of;common. The rate of conversion is to be;automatically;adjusted for stock splits and stock dividends. Dividends are paid quarterly on;September 30, December 31, March 31, and June 30.;4 Thompson;Corporation is subject to a 40% income tax rate.;5 The;after-tax net income for the year ended December 31, 2013, was $12,380,000.;The following specific activities took place during 2013.;1 January;1?A 5% common stock dividend was issued. The dividend had been declared on;December 1, 2012;to all;stockholders of record on December 29, 2012.;2 April;1?A total of 465,600 shares of the $3 convertible preferred stock was converted;into common stock.;The;company issued new common stock and retired the preferred stock. This was the;only conversion of the preferred stock during 2013.;3 July 1?A;2-for-1 split of the common stock became effective on this date. The board of;directors had authorized the split on June 1.;4 August;1?A total of 345,600 shares of common stock were issued to acquire a factory;building.;5;November 1?A total of 27,900 shares of common stock were purchased on the open;market at $9 per share. These shares;were to;be held as treasury stock and were still in the treasury as of December 31;2013.;6 Common;stock cash dividends - Cash dividends to common stockholders were declared and;paid as follows;April;15 - $0.30 per share;October;15 - $0.20 per share;7 Preferred;stock cash dividends - Cash dividends to preferred stockholders were declared;and paid as scheduled.;Instructions.;(a);(a) Determine the number of shares used to;compute basic earnings per share for the year ended December 31, 2013. (Round;answer to 0 decimal places, e.g. 1,500.);(b);(b) Determine;the number of shares used to compute diluted earnings per share for the year;ended December 31, 2013.;(c);Compute the adjusted net income to be used as;the numerator in the basic earnings per share cacluation for the year


Paper#48993 | Written in 18-Jul-2015

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