Problem - Satsuma Ltd. provides the following information for 2014:
1. Net income $560,000
2. Capital structure:
a. Convertible 6% bonds. Each of the 300, $1,000 bonds is convertible into 50 common shares for the next 10 years 300,000
b. Common shares, 200,000 shares issued and outstanding during the entire year 2,000,000
c. Stock options outstanding to buy 16,000 common shares at $20 per share.
3. Other information:
a. Bonds converted during 2014 None
b. Income tax rate 30%
c. Convertible debt was outstanding the entire year
d. Average market price per common share during 2014 $32
e. Stock options were outstanding the entire year
f. Stock options exercised during 2014 None
Instructions - Calculate basic and diluted earnings per share for 2014.