Question

At December 31, 2023, Olsen Company had 600,000 shares of common stock outstanding. On October 1, 2024, an additional 120,000 shares of common stock were issued. In addition, Olsen had $5,000,000 of 6% convertible bonds outstanding at December 31, 2023, which are convertible into 270,000 shares of common stock. No bonds were converted into common stock in 2024. The net income for the year ended December 31, 2024, was $1,500,000. Assuming the income tax rate was 30%, the diluted earnings per share for the year ended December 31, 2024, should be (rounded to the nearest cent):

Answer 1

$1.9

Step-by-step explanation:

Net income = $1,500,000 + $5,000,000*6%*(1-30%)

Net income = $1,500,000 + $210,000

Net income = $1,710,000

Number of shares = 600,000 + 120,000*3/12 + 270,000

Number of shares = 600,000 + 30,000 + 270,000

Number of shares = 900,000

Diluted earnings per share = Net income / Number of shares

Diluted earnings per share = $1,710,000/900,000

Diluted earnings per share = $1.9