Problem - Computation of Basic and Diluted EPS
The information below pertains to Barkley Company for 2010.
Net income for the year $1,200,000
8% convertible bonds issued at par ($1,000 par value) Each bond is convertible into 30 shares of common stock 2,000,000
6% convertible, cumulative preferred stock, $100 par value. Each share is convertible into 3 shares of common stock 4,000,000
Common Stock, $10 par value 6,000,000
Tax rate for 2010 40%
Average market price of common stock $25 per share
There were no changes during 2010 in the number of common shares, preferred shares, or convertible bonds outstanding. There is no treasury stock. The company also has common stock options (granted in a prior year) to purchase 75,000 shares of common stock at $20 per share.
(a) Compute basic earnings per share for 2010.
(b) Compute diluted earnings per share for 2010.