Zeller Corporation began 2018 with 120,000 shares of common stock and 16,000 shares of convertible preferred stock outstanding. On March 1 an additional 10,000 shares of common stock were issued. On August 1, another 16,000 shares of common stock were issued. On November 1, 6,000 shares of common stock were acquired for the treasury. The preferred stock has a $2 per-share dividend rate, and each share may be converted into one share of common stock. Zeller Corporation’s 2018 net income is $501,000.
a. Compute basic earnings per share for 2018.
b. Compute diluted earnings per share for 2018.
c. If the preferred stock were not convertible, Zeller Corporation would have a simple capital structure. How would this change Zeller’s earnings per share presentation?
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