During all 2015, Abel Inc. had 831,000 shares of common stock and 45,000 shares of $80 par value, 7%, noncumulative, nonconvertible preferred stock issued and outstanding.
On Dec. 15, 2015, Abel paid cash dividends of $550,000 to common shareholders and also cash dividends of _____ to preferred shareholders.
Abel’s net income for the year ended Dec. 31, 2015, was $2,850,000.
The income tax rate is 40%.
As part of an incentive compensation plan, Abel granted 22,000 incentive stock options to division managers on Dec. 31, 2013. Each option permits its holder to buy one share of common stock at an exercise price of $36 per share, which can be exercised one year from that date.
The market price of the common stock averaged $40 per share during 2015.
On July 12, 2013, Abel issued $800,000 of convertible 10% bonds at face value. Each $1,000 bond is convertible into 40 common shares.
a. Compute Abel’s basic earnings per share for the year ended Dec. 31, 2015.
b. Compute Abel’s fully diluted earnings per share for the year ended Dec. 31, 2015.
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