Austin Products Reported $400,000 Net Income for the Year with 100,000

Austin Products reported $400,000 net income for the year with 100,000 common shares outstanding all year. Austin also had 60,000 shares of $100, 8% convertible preferred shares outstanding all year. Each preferred share is convertible into 10 shares of common stock. Determine the numerator for both basic and diluted EPS.

A) basic EPS $400,000 - (60,000 × $100 × 8%) ; diluted EPS $400,000 - (60,000 × $100 × 8%)
B) basic EPS $400,000 - (60,000 × $100 × 8%) ; diluted EPS $400,000
C) basic EPS $400,000 - (60,000 × $100 × 8%) ; diluted EPS $400,000 + (60,000 × $100 × 8%)
D) basic EPS $400,000; diluted EPS $400,000

Correct Answer:

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