Question

On January 2, 2018, Coronado Industries issued at par $2040000 of 5% convertible bonds. Each $1000 bond is convertible into 10 shares of common stock. No bonds were converted during 2018. Coronado had 194000 shares of common stock outstanding during 2018. Coronado's 2018 net income was $906000 and the income tax rate was 35%. Coronado's diluted earnings per share for 2018 would be (rounded to the nearest penny): $5.18 $4.90 $4.67 $4.53

Answer 1

Coronado's diluted earnings per share would be 4.53

Step-by-step explanation:

Net interest savings = (2040000*5%)*(1-0.35)= $66,300

Weighted average common stock outstanding=194000+(2040000/1000*10)= 214,400

Coronado's diluted earnings per share=(906,000+66,300)/214,400= $4.53