Diluted Earnings per Share—Convertible Bonds
Delgado Manufacturing Company reports long term liabilities and stockholders’ equity balances at December 31, 2008, as follows:
|
Convertible 5% bonds (par) |
$ 800,000 |
|
Common stock, $25 par, 100,000 shares issued and outstanding |
2,500,000 |
Additional information is determined as follows:
|
Conversion term of bonds—50 shares for each $1,000 bond |
|
|
Income before extraordinary items—2008 |
$ 199,800 |
|
Extraordinary gain (net of tax) |
43,520 |
|
Net income—2008 |
$ 243,320 |
Compute the basic and diluted EPS for the company for 2008, assuming that the income tax rate is 30%. No changes occurred in the debt and equity balances during 2008.