Question

At the beginning of the fiscal year, June 1, Fox Corporation had 80,000 shares of common stock outstanding. Also outstanding was $200,000 of 8% convertible bonds that had been issued at $1,000 par. The bonds were convertible into 20,000 shares of common stock; however, no bonds were converted during the year. Fox's tax rate is 34% and net income for the year was $107,000. Diluted earnings per share of Fox common stock for the fiscal year ended May 31 was ___.

Answer 1

The Diluted earnings per share of Fox common stock for the fiscal year ended May 31 was $1.1756

Step-by-step explanation:

The bonds were not converted during the fiscal year. The Diluted earning per share will be claculated as follows:

Diluted earning per share

= [net income available to shareholders + bond interest (1 - tax rate)] / Weighted average number of shares outstanding

= [$107000 + $200000*8%*(1 - 34%)]/(80000 + 20000)

= [$107000 + 16000*(0.66)]/(100000)

= [117560]/(100000)

= $1.1756

Therefore, The Diluted earnings per share of Fox common stock for the fiscal year ended May 31 was $1.1756