Graham Railways Inc. is evaluating its operations and provides the following information:

Required:
For each of the years 2014 through 2016, calculate Graham Railways€™s earnings per share and dividend yield ratio. The company' has no preferred stock or other potentially dilutive securities outstanding.
P16-23 Convertible Securities and Earnings per Share At the beginning of 2016, Microbee Honey Corporation had 90,000 shares of $1.00 par value common stock issued and outstanding. During 2016, the following common stock transactions have taken place:
Feb. 1, Issued 40,000 shares at a price of $32 per share.
Apr. 1, Declared and distributed a 10% stock dividend. The market price on that date was $36.
June 1 Repurchased 16,000 shares for the treasury at a price of $33 per share.
Aug. 1 Reissued 5,000 shares from the treasury at a price of $45 per share.
Nov. 30 Declared a 2-for-l stock split. The market price on that date was $56.
For 2016, Microbee reported $575,000 of net income. In addition, the company had the following securities outstanding:
1. 22,000 stock options issued on March 1, 2016. The stock options have an exercise price of $15, and none had been exercised as of December 31, 2016.
2. 5,000 shares of $100 par value, 12% cumulative convertible preferred stock. Each share of preferred stock is convertible into 15 shares of common stock. The shares w were issued in 2012.
3. $600,000 of 9% convertible bonds issued at par. The bonds were Issued in 2014 and as of December 31, 2016, none had been converted into common shares. Each $1,000 bond is convertible into 32 shares of common stock.
All option exercise prices and conversion ratios have been adjusted for stock dividends and stock splits that occurred during the year. Microbee has an effective tax rate of 36% and had an average stock price during 2016 of $37 adjusted for stock splits and dividends.
Required:
1. Calculate basic earnings per share for Microbee for 2016.
2. Calculate tentative DEPS and incremental DEPS for each dilutive security'.
3. What would Microbee report for basic and diluted earnings per share for 2016?

Transcribed Image Text:

2016 2014 s 62,854 45,852 35,456 $381500 $246,250 $145,490 Net income Total assets at year-end Common shares outstanding Weighled average number of common shares outstanding Total liabilities at year-end Dividends per common share Common shareholders' equity at year end Ending share price 56,000 49,000 41,000 52,500 $0.40 $24.20 47,500 $0.35 $18.75 41,000 $0.25 $14.40 $206 $7,800 52,690 9 $175,400 $128,450 92,800