Question: In 2016, Culver Enterprises issued, at par, 60 $1,000, 9% bonds, each convertible into 100 shares of common stock. Culver had revenues of $15, 800 and expenses other than interest and taxes of $9,000 for 2017. (Assume that the tax rate is 40%.) Throughout 2017, 1, 900 shares of common stock were outstanding; none of the bonds was converted or redeemed.
(a) Compute diluted earnings per share for 2017.
(b) Assume the same facts as those assumed for part (a), except that the 60 bonds were issued on September 1, 2017 (rather than in 2016), and none have been converted or redeemed. Compute diluted earnings per share for 2017.
(c) Assume the same facts as assumed for part (a), except that 20 of the 60 bonds were actually converted on July 1, 2017. Compute diluted earnings per share for 2017.