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Goshia [24]
3 years ago
7

On January 2, 2016, Sarah Lawrence Co. issued at face value $10,000 4% bonds convertible in total into 2,000 shares of Lawrence’

s common stock. No bonds were converted during 2016. Throughout 2016, Lawrence had 10,000 shares of common stock outstanding. Lawrence’s 2016 net income was $2,000. The income tax rate id 40%. No potential common shares other than the convertible bonds were outstanding during 2016. Diluted earnings per share for 2016 would be:
a) $.20
b) $.19
c) $.17
d) $.15
Business
1 answer:
viva [34]3 years ago
4 0

Answer:

b) $.19

Explanation:

Diluted earnings per share

= [net income + (convertible debt interest(1 - tax rate)]/(outstanding common shares + potential shares )

= [$2000 + ($400×(1 - 0.40)]/(10000 + 2000 )

= $2240/12000

= $0.19

Diluted earnings per share for 2016 would be $0.19

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