Current Ratio (Working Capital Ratio)

EPS Calculations

Solve BOTH EPS (Earnings Per Share) questions below

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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, 202180,000  
  Incentive stock options (vested in 2020) outstanding throughout 202124,000  
  (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.

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