Discussion: Rhonda Company
Rhonda Company had 40,000 shares of common stock outstanding during 2010 and compensatory stock options to purchase 5,000 shares of common stock at $10 a share plus a $3 a share unrecognized compensation cost (net of tax).
The average market price is $20 a share.
The company also had 7% convertible preferred stock on which dividends of $9,000 were declared. Preferred stock is convertible into 6,000 common shares.
Rhonda's after-tax net income was $88,000, and the tax rate was 40%.
Compute 2010 diluted earnings per share for Rhonda Company. Label you work and show all calculations.
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.