Question

Sunland Company had 204000 shares of common stock, 21000 shares of convertible preferred stock, and $592000...

Sunland Company had 204000 shares of common stock, 21000 shares of convertible preferred stock, and $592000 of 11% convertible bonds outstanding during 2021. The preferred stock is convertible into 40400 shares of common stock. During 2021, Sunland paid dividends of $0.54 per share on the common stock and $1.80 per share on the preferred stock. Each $1,000 bond is convertible into 45 shares of common stock. The net income for 2021 was $357000 and the income tax rate was 25%.


diluted earnings per share for 2021 is (rounded to the nearest penny)
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Answer #1

Solution

Diluted Earning Per share :

= [Net Income + Interest on Bond(after tax)] / Weighted average number of diluted common stock

Here,

Net Income = $357,000

Interest on Bond (After Tax) = $592,000 * 11% * (1-25%) = $48,840

Weighted average number of diluted common stock:

Substituting above figures into formula,

Diluted Earning Per share = ($357,700 + $48,840) / 271,040

= $406,540 / 271,040 = $1.50

Therefore, Diluted earning per share for 2021 is $1.50.

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