Question

On January 1, 2017, Culver Company issued 10-year, $2,010,000 face value, 6% bonds, at par. Each $1,000 bond is convertible into 15 shares of Culver common stock. Culver’s net income in 2017 was $322,000, and its tax rate was 40%. The company had 108,000 shares of common stock outstanding throughout 2017. None of the bonds were converted in 2017. (a) Compute diluted earnings per share for 2017. (Round answer to 2 decimal places, e.g. $2.55.) Diluted earnings per share $

Answer 1

Diluted earnings per share is $2,33

Step-by-step explanation:

Diluted earnings per share = (The company’s net income− dividends on preferred stock)/ (outstanding shares of common +Diluted shares)

Diluted shares is the share could be converted from any convertible bond = ($2,010,000/$1,000)*15 = 30,150

= ($322,000 – 0)/ (108,000+30,150) = $2.33