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, 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. |
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