Problem - The information below pertains to Pearl Company for 2018.
Net income for the year $1,190,000
7% convertible bonds issued at par ($1,000 per bond); each bond is convertible into
30 shares of common stock 1,970,000
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 6,280,000
Tax rate for 2018 40%
Average market price of common stock $25 per share
There were no changes during 2018 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 68,800 shares of common stock at $20 per share.
(a) Compute basic earnings per share for 2018.
(b) Compute diluted earnings per share for 2018.