Baroke Bank, NA started the year with 600,000 common shares outstanding and issued 48,000, 840,000, and 72,000 shares on February 1, May 1, and September 1, respectively. Baroke acquired 12,000 treasury shares on March 1. The company has employee options outstanding all year that enable employees to acquire 358,000 shares at an exercise price of $ 15 per share. Baroke’s shares traded at an annual average price of $ 10 per share. Employees did not exercise any options during the year. Baroke also reported convertible preferred shares that can be used to acquire 465,000 shares of common stock outstanding as of the beginning of the year. The firm reported preferred stock at $ 1,567,000 par value. The preferred shares are cumulative and carry an 8% dividend rate. The board of directors declared the annual dividend. We present a partial income statement for the current year below. Baroke is subject to a 35% income tax rate.
Required
Partial Income Statement For the Current Year
Income from continuing operations, net of tax……………………. $ 4,005,320
Loss from discontinued operations, net of tax……………………. (1,218,120)
Net income…………………….………………………………….. $ 2,787,200
a. Compute basic and diluted earnings per share. Show all computations.
b. Prepare all required disclosures beginning with income from continuing operations.