Edmund Halvor of the controller’s office of East Aurora Corporation was given

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P16-6 (EPS Computation of Basic and Diluted EPS)

Edmund Halvor of the controller’s office of East Aurora Corporation was given the assignment of determining the basic and diluted earnings per share values for the year ending December 31, 2007. Halvor has compiled the information listed below.

1. The company is authorized to issue 8,000,000 shares of $10 par value common stock. As of
December 31, 2006, 3,000,000 shares had been issued and were outstanding.

2. The per share market prices of the common stock on selected dates were as follows.
Price per Share
July 1, 2006 $20.00
January 1, 2007 21.00
April 1, 2007 25.00
July 1, 2007 11.00
August 1, 2007 10.50
November 1, 2007 9.00
December 31, 2007 10.00

3. A total of 700,000 shares of an authorized 1,200,000 shares of convertible preferred stock had been
issued on July 1, 2006. The stock was issued at its par value of $25, and it has a cumulative dividend
of $3 per share. The stock is convertible into common stock at the rate of one share of convertible
preferred for one share of common. The rate of conversion is to be automatically adjusted
for stock splits and stock dividends. Dividends are paid quarterly on September 30, December 31,
March 31, and June 30.

and so on. ...