YES, Inc., reported five securities outstanding on January 1, 2019. There were no equity related transactions during the year and thus these remained unchanged throughout the year. You are provided the following particulars about the basic EPS plus the incremental effect per share required for the calculation of diluted EPS for each of the five securities are listed below: Shares Adjusted Income ($) $1,519,000 Basic EPS 350,000 Change In Income Change In Security Shares Call Options $0 21,000 Convertible Bonds $147,000 36,750 Convertible Preferred Shares $56,000 42,000 Put Options $0 (2,800) Warrants $0 70,000 [66] YES reported $877,000 as income from operations and 200,000 shares as weighted average common shares in 2017. YES also reported outstanding, 27,000 of 6%, $100 par value, non-cumulative, nonconvertible preferred shares. The company had not declared any dividends for either the current year or the previous year. Further, it had issued 1,500 8% , long-term convertible bonds, par value of $1,000 each. These bonds had been issued several years ago and were still outstanding as at January, 2017. Each bond can be converted into 40 common shares. No amount of the bond issue was credited towards contributed surplus-conversion. The annual tax rate for 2017 was 40%. On September 1, bondholders of 25% of the outstanding bonds converted them. YES had no other potentially dilutive securities and no other conversions occurred during the year. The denominators for calculating the basic EPS and the diluted EPS would be a. 200,000 shares and 215,000 shares. Ob. 205,000 shares and 215,000 shares. O c. 200,000 shares and 255,000 shares. O d. 260,000 shares and 215,000 shares. Oe. None of the above. [64] YES began the year, 2019 with 200,000 shares of common stock and 30,000 shares of 7%, $100 par value, cumulative, nonconvertible preferred stock. On March 1 it declared a 5% stock dividend on common shares. On September 30, it purchased 20,000 common shares and cancelled them. On October 1, YES declared a 2-for-one stock split. Operating income for the year was $762,600 and no dividends for 2019 were declared. However, it did pay on January 12, 2019, the preferred dividends which had been declared on November 20, 2018. Compute the weighted average number of common shares and the basic EPS for the year. O a. 2,660,000 shares and $14.07. O b. 380,000 shares and $1.45. O c. 2,870,000 shares and $9.45. O d. 410,000 shares and $1.35. O e. None of the above. [68] For this question only, assume that YES had granted 45,000 stock options (put options) to some of its executives, and each option gave the holder the right to sell to YES, one share at the option price of $37 per share. None of these options have yet been exercised throughout 2019. The average market price of the common shares of YES during 2019 was $20. Using the reverse treasury stock method (i.e., cash out/cash in), what is the impact on the number of shares that should be used in calculating diluted earnings per share for 2019? O a. 20,676 shares. O b. 16,650 shares. O c. 38,250 shares. O d. The number of shares cannot be determined with the information given. Oe. None of the above
