Calculate basic EPS, and explain the EPS effect of convertible preferred. Thrifty Co. reported net income of

Question:

Calculate basic EPS, and explain the EPS effect of convertible preferred. Thrifty Co. reported net income of $465,000 for its fiscal year ended January 31, 2011. At the beginning of that fiscal year, 200,000 shares of common stock were outstanding. On October 31, 2010, an additional 60,000 shares were issued. No other changes in common shares outstanding occurred during the year. Also during the year the company paid the annual dividend on the 25,000 shares of 7%, $40 par value preferred stock that were also outstanding the entire year.

(a) Calculate basic earnings per share of common stock for the year ended January 31 2011.

(b) If Thrifty Co.’s preferred stock were convertible into common stock, what additional calculation would be required?

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their... Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...