Answer:
diluted EPS = $2.05
Explanation:
diluted earnings per share = net income / (weighted common stocks outstanding + diluted shares).
net income = $800,000
weighted common stocks outstanding:
January 1, 200,000 common stocks
April 1, 20,000 stocks issued = 20,000 x 9/12 = 15,000 common stocks
September 1, 30,000 treasury stocks purchased = -30,000 x 4/12 = -10,000
total weighted stocks outstanding = 205,000
diluted shares:
30,000 options at $40 per stock = [($50 - $40) / $50] x 30,000 = 6,000
2,000 bonds x 30 stocks = 60,000
preferred stock = 40,000 x 3 = 120,000
total diluted shares = 186,000
diluted EPS = $800,000 / (205,000 + 186,000) = $2.05
