Problem #1: A company has an operating income of $450,000 and does not have any preferred shares. They had 120,000 shares of c/s o/s on Jan 1 with the following stock transactions during the year:

Feb 1 Reacquired 40,000 shares held in treasury

May 1 Issue 20,000 shares

August 1 Declare a 20% stock dividend

Nov 1 Issue 12,000 shares

Dec 1 Declare a 2 for 1 stock split

THE WEIGHTED AVG # of C/S SHARES for EPS is 230667 and Basic EPS is 1.95.

For 2020, COBA Inc. had an income of $1,960,000. Searcy COBA is in a 20% tax bracket.

Common Stock Information:

1/1/2020 800,000 shares outstanding

4/1/2020 Issued 200,000 additional shares at $44

8/1/2020 Issued a 20% stock dividend

12/1/2020 Issued 600,000 shares of common stock @ $55

Common Stock prices over the year:

Average $50 4/1/2020 $44

7/1/2020 $48 12/1/2020 $55

12/31/2020 $56

Common stock equivalents:

50,000 Stock options outstanding all year, exercisable at $30; outstanding at end of year

20,000 Stock options issued on 4/1/2020; exercisable at $40; outstanding at end of year

8% Cumulative Preferred stock (10,000 shares of $50 par; 1 P/S converts to 5 shares C/S)

8% Convertible Bond (2,000 - $1,000 bonds; each converts to 80 shares of C/S)

10% Convertible Bond (1,800- $1,000 bonds; each bond converts to 50 shares of C/S)

REQUIRED:

1. Calculate Weighted Average Number of Shares for Basic EPS (show work)
2. Calculate Basic EPS (show work)
3. Identify which of the common stock equivalents is/are dilutive (show work)
4. Calculate Dilutive EPS and discuss if it needs reported.