Answer:
Bonita’s diluted earnings per share for 2018 would be $3,80
Explanation:
<em>Step 1 Calculate the Basic Earnings Per Share</em>
Basic Earnings Per Share = Income Attributable to Common Stockholders / Weighted Average Number of Common Stocks
<u>Income Attributable to Common Stockholders</u>
Net income $902000
<em>less</em> Interest on bonds ($2020000×5%)×75% ($75,750)
Income Attributable to Common Stockholders $826,250
Basic Earnings Per Share =$826,250 / 197000
=$4,19
<em>Step 1 Calculate the Diluted Earnings Per Share</em>
Diluted Earnings Per Share =<em>Adjusted</em> Income Attributable to Common Stockholders / <em>Adjusted</em> Weighted Average Number of Common Stocks
<u>Adjusted Income Attributable to Common Stockholders</u>
Income Attributable to Common Stockholders $826,250
Add Interest on bonds ($2020000×5%)×75% ($75,750)
Income Attributable to Common Stockholders $826,250
<u><em>Adjusted</em></u><u> Weighted Average Number of Common Stocks</u>
common stock outstanding 197000
add convertible bond ( $2020000/$1000×10 shares) 20200
Weighted Average Number of Common Stocks 217200
Diluted Earnings Per Share = $826,250/217200
= $3,80
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