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EPS Calculations

Solve BOTH EPS (Earnings Per Share) questions below

QUESTION #1)

Stanley Department Stores reported net income of $720,000 for the year ended December 31, 2021.

Additional Information:


Common shares outstanding at Jan. 1, 2021	80,000
Incentive stock options (vested in 2020) outstanding throughout 2021	24,000
(Each option is exercisable for one common share at an exercise price of $37.50)
During the year, the market price of Stanley’s common stock averaged $45 per share.
On Aug. 30 Stanley sold 15,000 common shares.
Stanley’s only debt consisted of $50,000 of 10% short term bank notes.
The company’s income tax rate is 40%.

Required:

Compute Stanley’s basic and diluted earnings per share for the year ended December 31, 2021

QUESTION #2)

Information from the financial statements of Ames Fabricators, Inc., included the following:

	December 31

		2021	2020
Common shares		100,000	100,000
Convertible preferred shares (convertible into 32,000 shares of common)		12,000	12,000
10% convertible bonds (convertible into 30,000 shares of common)		1,000,000	1,000,000

Ames’s net income for the year ended December 31, 2021, is $500,000. The income tax rate is 40%. Ames paid dividends of $5 per share on its preferred stock during 2021.

Required:

Compute basic and diluted earnings per share for the year ended December 31, 2021.