From 0.97 basic to 0.93 diluted, the AC301 Unit 10 earnings per share problem walks a composite solar installer through weighted shares, a retroactive split and three potential dilutors. Searches like "ac 301 unit 10 assignment example", "ac301 unit 10 sample" and "ac301 unit 10 example" land here.
What a finished AC301 Unit 10 earnings per share problem looks like
A share-weighting table, a basic computation, a ranking table and a diluted computation. The weighting table has one row per period: 1,000,000 shares from January to March, restated as 2,000,000 for the July split; 1,200,000 from April to September, restated as 2,400,000; and 2,280,000 after 120,000 treasury shares were bought in October. Weighted by months, they total 2,270,000. Basic EPS divides net income of 2,400,000, less 200,000 of preferred dividends, by that figure: 0.97. The ranking table lists each potential dilutor with its incremental effect per share. Options for 300,000 shares at 15, with an average market price of 20, add 75,000 shares and no income, the most dilutive. Convertible bonds add 158,000 of after-tax interest and 200,000 shares, 0.79 per share. Warrants priced at 24 are antidilutive and excluded. Diluted EPS is 0.93.
How a AC301 Unit 10 example is structured
The weighting table comes first because every EPS figure depends on its denominator. The split is applied retroactively to all earlier periods, so shares outstanding before July are doubled as if the split had always existed. Basic EPS follows, with preferred dividends subtracted in the numerator because common shareholders have no claim to them. The ranking table then orders the potential dilutors from the smallest incremental effect upward, the sequence the standard requires. Options enter first under the treasury stock method, the bonds under the if-converted method, each tested against the running figure: 0.94 after options, 0.93 after bonds. The warrants are shown and excluded, with the reason stated. A closing sentence for investors explains what the gap between 0.97 and 0.93 says about potential claims on earnings.
Shares weighted by months
Three periods, each restated for the two-for-one split, weighted by how long the shares were outstanding. The total of 2,270,000 replaces any year-end count.
Basic EPS of 0.97
Net income of 2,400,000 less 200,000 of preferred dividends, divided by weighted shares. Only income available to common shareholders enters the numerator.
Ranking the dilutors
Options add shares with no income effect; bonds add 0.79 per incremental share; warrants exercisable at 24 would be antidilutive. The order decides inclusion.
Treasury stock and if-converted
Option proceeds buy back 225,000 shares at 20, netting 75,000 new ones. Bonds add back 158,000 of after-tax interest and 200,000 shares.
Diluted EPS and what it signals
The running figure falls to 0.94, then 0.93. A final sentence tells an investor how much each current share's claim on earnings could thin if every dilutive instrument converted.
Where marks go in AC301 Unit 10
A denominator built from year-end shares instead of weighted ones is the loss graders see first, and here it would give 0.96 rather than 0.97. Applying the split only from July forward, instead of retroactively, understates the early periods and the whole average. Omitting preferred dividends from the numerator overstates basic EPS. In the diluted computation, adding back bond interest before tax rather than after inflates the numerator. Including the warrants, which would raise EPS, breaks the antidilution rule outright. Testing dilutors in the wrong order can let an instrument in that should stay out, and a grader who ranks them will find it. A missing interpretive sentence forfeits the marks many rubrics reserve for explaining what the figures mean to an investor weighing the stock.
Get a AC301 Unit 10 example written to your instructions
Timing drives the denominator, so dates matter most: every share issuance, split and buyback the Unit 10 problem lists, plus net income, preferred dividend terms, each option, warrant or convertible, and the rubric. Weighting, ranking and both EPS figures come back within 24-48h, interpretive sentence included, and the first custom sample costs nothing.
AC301 Unit 10 questions, answered
Why are shares before the split doubled when the split happened in July?
Because a stock split changes the number of shares without changing anyone's ownership or the company's resources. Restating all earlier periods as if the split had always been in effect keeps the per-share figures comparable across the year and with prior years. Stock dividends are treated the same way. The sample marks the restatement in the table heading so the adjustment is visible.
How does the treasury stock method work for the options?
It assumes the options are exercised at the start of the year and the proceeds are used to buy back shares at the average market price. Here 300,000 options at 15 bring in 4,500,000, which repurchases 225,000 shares at 20. The net 75,000 shares are added to the denominator. Options with an exercise price above the average market price are antidilutive and left out.
What if the preferred stock were convertible?
Then it would join the ranking. Under the if-converted method, its dividends would be added back to the numerator and the conversion shares added to the denominator, and its incremental effect per share would place it in the sequence. If that effect exceeded the running diluted figure it would be excluded as antidilutive. The sample adds it when the problem states a conversion feature.