Computing Basic and Diluted Earnings per Share Soliman Corporation began the year 2018 with 25,000 shares of common stock and 5,000 shares of convertible preferred stock outstanding. On May 1, an additional 9,000 shares of common stock were issued. On July 1, 6,000 shares of common stock were acquired for the treasury. On September 1, the 6,000 treasury shares of common stock were reissued. The preferred stock has a $4 per share dividend rate, and each share may be converted into 2 shares of common stock. Soliman Corporation’s 2018 net income is $230,000. Required
a. Compute earnings per share for 2018. Round your answer to two decimal places.
b. Compute diluted earnings per share for 2018. Round your answer to two decimal places.

Soliman Corporation

1. Basic EPS

= $6.18 per share

2. Diluted EPS

= $5.23 per share

Explanation:

a) Data and Calculations:

Convertible Preferred Stock = 5,000 or 10,000 Common Shares

Common Stock:

January 1, 2018 =                  25,000

May 1, 2018 Issued                 9,000

July 1, 2018 Treasury            (6,000)

September 1, 2018 Treasury 6,000

Total outstanding                34,000

Converted preferred stock 10,000

Total outstanding               44,000

2018 Net Income =    $230,000

Preferred dividend        20,000 ($4 * 5,000)

Income for Common $210,000

Basic Earnings per share = $210,000/34,000 = $6.18

Diluted Earnings per share = $230,000/44,000 = $5.23

in 2001, dell computer became the world’s largest personal computer vendor, continuing to

gain market share and post profits in an industry struggling with slumping sales and billions of

dollars in losses. dell sells 90% of its pcs directly to the final customer, largely bypassing the

reseller channel that accounts for most of the world’s pc sales. this direct customer relationship

is the key to dell’s business model, and provides distinct advantages over the indirect sales

model. dell’s direct relationship with the customer allows it to tailor its offerings to customer

needs, offer add-on products and services, and use the internet to offer a variety of customer

services. in addition, dell’s pcs are built to customers’ specifications upon receipt of an order,

giving dell additional advantages over indirect pc vendors who must try to forecast demand and

ship products based on those forecasts. dell’s direct sales and build-to-order model has achieved

superior performance in the pc industry in terms of inventory turnover, reduced overhead, cash

conversion, and return on investment (kraemer, et al., 2000).

explanation:

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