In 20x0 Bon Enterprises issued, at par, 60, $1,000, 8% bonds, each convertible into 100 shares of common stock. Bon had revenues of $17,500 and expenses other than interest and taxes of $8,400 for 20x1 (assume that the tax rate is 40%). Throughout 20x1, 2,000 shares of common stock were outstanding; none of the bonds was converted.
Required:
a) Compute basic and diluted EPS for 20x1.
b) Assume the same facts as for part 1), except that the 60 bonds were issued on September 1, 20x1 (rather than 20x0), and none of them was converted. Compute basic and diluted EPS for 20x1.