Madsen Company had five convertible securities outstanding during all of 2014. It paid the appropriate interest (and amortized any related premium or discount using the straight-line method) and dividends on each security during 2014. Each of the convertible securities is described in the following table:
10.2% bonds $200,000 face value. Issued at par. Each $1,000 bond is convertible into 28 shares of common stock
12.0% bonds $160,000 face value. Issued at 110. Premium being amortized over 20-year life. Each $1,000 bond is convertible into 47 shares of common stock.
9.0% bonds $200,000 face value. Issued at 95. Discount being amortized over 10-year life. Each $1,000 bond is convertible into 44 shares of common stock.
8.3% preferred stock $120,000 par value. Issued at 108. Each $100 par preferred stock is convertible into 3.9 shares of common stock.
7.5% preferred stock $180,000 par value. Issued at par. Each $100 par preferred stock is convertible into 6 shares of common stock.
Additional data:
Net income for 2014 totaled $119,460. At January 1, 2014 there were 20,000 shares of common stock outstanding. On July 3, 40,000 additional shares were issued. No stock options or warrants are outstanding. The effective corporate income tax rate is 30%.
a.Compute basic earnings per share.
b.Compute diluted earnings per share.
c.Prepare the portion of the income statement, starting with net income, that would disclose the earnings per share information.