Paul Company Had 100,000 Shares of Common Stock Outstanding on January

question 50

Essay

Paul Company had 100,000 shares of common stock outstanding on January 1, 2013. On September 30, 2013, Paul sold 48,000 shares of common stock for cash. Paul also had 10,000 shares of convertible preferred stock outstanding throughout 2013. The preferred stock is $100 par, 6%, and is convertible into 3 shares of common for each share of preferred. Paul also had 500, 8%, convertible bonds outstanding throughout 2013. Each $1,000 bond is convertible into 30 shares of common stock. The bonds sold originally at face value. Reported net income for 2013 was $300,000 with a 40% tax rate. Common shareholders received $2 per share dividends after preferred dividends were paid in 2013.
Required:
Compute basic and diluted earnings per share (rounded to 2 decimal places) for 2013.

Understand the concept of excess capacity and its implications for resource allocation in monopolistic competition.

Comprehend how product differentiation and advertising affect demand elasticity and firm's market power in monopolistic competition.

Recognize the role of economic profits in signaling entry or exit of firms in the industry.

Relate the influence of number of firms, product differentiation, and market entry barriers on the market outcomes in monopolistically competitive markets.

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Definitions:

Continuous Improvement

A continuous endeavor to improve products, services, or processes by making both small and significant advancements.

W. Edwards Deming

An American engineer, statistician, professor, author, lecturer, and management consultant, known for his work in the field of quality management.

Wagner Act

U.S. legislation passed in 1935 that established the rights of employees to unionize, engage in collective bargaining, and take collective action, including striking.

Collective Bargaining

The process of negotiation between employers and a group of employees aimed at agreements to regulate working salaries, working conditions, benefits, and other aspects of workers' compensation and rights.