Teek 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. Teek acquired 12,000 treasury shares on March 1.
The company has employee stock options outstanding all year that enable employees to acquire 358,000 shares at an exercise price of $ 15 per share. Teek’s shares traded at an annual average price of $ 10 per share. Employees did not exercise any options during the year.
Teek also reported convertible debt and convertible preferred shares. The convertible debt securities the firm issued at par on August 1 for $ 15,000,000 pay interest at 4% per year. Each $ 1,000 par value bond converts into six shares of the company’s common stock at the debt holder’s option. Convertible preferred shares to acquire 465,000 shares of common stock were outstanding as of the beginning of the year. Teek reported the preferred stock at a $ 1,567,000 par value. The preferred shares are cumulative and carry an 8% dividend rate. Below we present a partial income statement for the current year. Teek is subject to a 35% income tax rate.
Partial Income Statement For the Current Year
Income from continuing operations……………………….. $ 4,005,320
Loss from discontinued operations, net of tax…………….. (1,218,120)
Net income………………………..………………………. $ 2,787,200
Required
a. Compute the weighted-average number of common shares outstanding for basic earnings per share.
b. Determine whether any securities are antidilutive and compute basic and diluted earnings per share. Show all computations.
c. Prepare all required disclosures beginning with income or loss from continuing operations.