Question

Jostens Co. had 200,000 shares of common stock, 20,000 shares of convertible preferred stock, and $1,000,000 of 10% bonds outstanding during 2017. The preferred stock is convertible into 20,000 shares of common stock. During 2017, Jostens paid endives of $1.20 per share on its common stock and $3.00 per share on its preferred stock. Each $1,000 bond is convertible into 30 shares of common stock. The net income for the year ended December 31,2017 was $80,000. Assume the income tax rate was 30%. Diluted earnings per share of 2017 (rounded to the nearest penny) are: Select one:
a. $3.64
b. $3.72
c. $3.36
d. $3.48
e. $3.22

Answer 1

Answer:

$3.46 per share

Explanation:

The computation of the diluted earning per share is shown below:

But before that the earning per share is

= ($800,000 - (20,000 shares × 3)) ÷ (200,000 shares)

= $3.70 per share

The diluted earning per share is

= ($800,000 - $60,000 + $60,000+ (1,000,000 × 10% ) × (1- 0.30)) ÷ (250,000 shares)  

= $865,000 ÷ 250,000 shares

= $3.46 per share

This is the answer but the same is not provided in the given options