Question

At December 31, 2015, Agler Company had 1,200,000 shares of common stock outstanding. On September 1, 2016, an additional 400,000 shares of common stock were issued. In addition, Agler had $12,000,000 of 6% convertible bonds outstanding at December 31, 2015, which are convertible into 800,000 shares of common stock. No bonds were converted into common stock in 2016. The net income for the year ended December 31, 2016, was $4,500,000. Assuming the income tax rate was 30%, what should be the diluted earnings per share for the year ended December 31, 2016, rounded to the nearest penny

Answer 1

The Diluted EPS is $2.11

Step-by-step explanation:

Diluted EPS=(Net Income-Preferred Dividend) /(weighted average of common stocks+ any potential convertible bonds or securities)

Diluted EPS=4,500,000/(1,200,000+(400,000*4/12)+800,000)

The 400,000 shares were issued on September 1,2016 therefore they have been weighted average for 4 months.