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QUESTION

Calculating Earnings per Share During 2013, Mayfair Enterprises had the following securities outstanding:

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Calculating Earnings per Share

During 2013, Mayfair Enterprises had the following securities outstanding:

  1. 250,000 shares of common stock with an average market price of $25 per share.
  2. 9.5% convertible preferred, which had been sold at its par value of $100. The preferred stock is convertible into three shares of common stock and 3,000 preferred shares are currently outstanding.

During 2013, Mayfair Enterprises earned net income after income taxes of $3.5 million. 

(a) Calculate the basic earnings per share for Mayfair Enterprises for 2013. 

 HINT: For basic EPS, remember to reduce net income by the preferred stock dividend. Round answer two decimal places. 

$Answer

(b) Calculate the diluted earnings per share for Mayfair Enterprises for 2013. HINT: For diluted EPS, remember to include additional shares (converted to common stock) in total number of shares outstanding. Round to two decimal places. 

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