Question

computing eps: convertible bonds a company has outstanding $140,000 of 8% convertible bonds due in five years. each $1,000 convertible bond is convertible into 40 shares of common stock. net income for the year was $896,000. common shares outstanding for the year were 375,000. the relevant tax rate is 25%. a. compute basic earnings per share. b. compute diluted earnings per share. note: enter the earnings per share amounts in dollars and cents, rounded to the nearest penny. net income available to common stockholders weighted avg. common shares outstanding per share basic eps answer answer answer diluted eps answer answer answer

Answer 1

          Net income available to      Weighted avg. Common      Per Share  

              Common stockholders.       Shares outstanding

                      (a)                                            (b)                                 (a-b)

Basic EPS      $896,000                           375,000                          $2.39

Diluted EPS   $904,400                           380, 600                         $2.38

No. of Common shares to compute diluted EPS

= Common shares + Convertible doods

375,000 + [$140,000 x 40/$1000]

= 375,000 + 5,600

= 380,600

To calculate earnings per share, subtract preferred dividends from the company's net income. Then divide that amount by the average number of common shares outstanding. Subtract preferred dividends from a company's net income and divide the result by the sum of the weighted average number of shares outstanding and the number of diluted shares.

Learn more about The relevant tax rate here:- brainly.com/question/19522494

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