Question

Swifty Corporation had 190000 shares of common stock, 19600 shares of convertible preferred stock, and $1430000...

Swifty Corporation had 190000 shares of common stock, 19600 shares of convertible preferred stock, and $1430000 of 5% convertible bonds outstanding during 2018. The preferred stock is convertible into 39500 shares of common stock. During 2015, Swifty paid dividends of $0.90 per share on the common stock and $3 per share on the preferred stock. Each $1,000 bond is convertible into 30 shares of common stock. The net income for 2018 was $602000 and the income tax rate was 35%.

Diluted earnings per share for 2018 is (rounded to the nearest penny)

a. $2.22

b. $2.38

c. $2.62

d. $2.18

Business   Accounting   
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Homework Answers

Answer #1

Net Income = $602000
convertible preferred Dividend = $3*19600 = $58800
After tax interested on convertible bonds= $1430000 * 5%*(1-0.35) = $46475
No. Of share of common stock outstanding = 190000
Dilutive potential common stock = 39500 +$1430000/$1000 *30 = 82400
Therefore

Diluted earning per share = $602000 + $58800 + $46475
190000 + 39500 + 42900
= $707275
272400
  
= $2.60

Option C. 2.62 is nearest One

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