Question

Terrell Foods reported $ 880 comma 000 in net income​ (not considering interest​ expense) and its weightedminusaverage shares outstanding for the year is 200 comma 000 shares. In prior years it sold $ 1 comma 000 comma 000 of​ 8% longminusterm convertible bonds at par which are still outstanding at the start of the year. The bonds are convertible into 50 comma 000 shares of common stock. The tax rate for all years is​ 40%. Bondholders convert the bonds on July 1 of the current year. If Terrell has no other potentially dilutive securities and no preferred​ stock, what is the numerator for basic and diluted​ EPS? (Round your final answers to the nearest​ cent.)

Answer 1

$880,000

Step-by-step explanation:

net income $880,000

weighted average outstanding shares = 200,000

earnings per share formula = (net income - preferred dividends) / weighted average outstanding stocks

diluted earnings per share formula = (net income - preferred dividends) / (weighted average outstanding stocks + diluted shares)

in both cases the numerator is the same = net income - preferred dividends

• net income = $880,000
• preferred dividends = $0

the numerator = $880,000