Compute Dilutive Earnings Per Share
I need help in solving this problem:
Corp had $500,000 net income in 2007. On 1/1/07 there were 200,000
shares of common stock outstanding. On 4/1, 20,000 shares were issued and
on 9/1, corp bought 30,000 shares of treasury stock. There are 30,000 options
to buy common stock at $40 a share outstanding. The market price of the
common stock averaged $50 during 2007. The tax rate is 40%.
During 2007, there were 40,000 shares of convertible preferred stock outstanding.
The preferred is $100 par, pays $3.50 a year dividend and is convertible into
three shares of common stock.
Corp issued $2,000,000 of 8% convertible bonds at face value during 2006.
Each $1,000 bond is convertible into 3 shares of common stock.
Instruction:
Compute diluted earnings per share for 2007. Complete the schedule and show
all computations.
