Question

Rockland Corporation earned net income of $321,000 in 2012 and had 100,000 shares of common stock outstanding throughout the year. Also outstanding all year was $856,000 of 10% bonds, which are convertible into 17,120 shares of common. Rockland's tax rate is 40 percent. Compute Rockland's 2012 diluted earnings per share.

Answer 1

Basic EPS = $321,000/ 100,000

Basic EPS = $3.21

Diluted EPS = $321,000+ [ $856,000*0.1 * 0.6]/ 100,000+17,120

Diluted EPS =$321,000 + 51360/ 117120

Diluted EPS =$3.18

Explanation: