Question

Hutchins Company had​ 200,000 shares of common​ stock, 50,000 shares of convertible preferred​ stock, and​ $2,000,000 of​ 10% convertible bonds outstanding during the entire year. The preferred stock was convertible into​ 40,000 shares of common stock.

During the current​ year, Hutchins paid dividends of​ $1.00 per share on the common stock and​ $2.00 per share on the preferred stock. Each​ $1,000 bond was convertible into 50 shares of common stock. The net income for the year was​ $1,000,000, and the income tax rate was​ 30%.

Diluted earnings per share for the current year was​ (rounded to the nearest​ penny):

Answer 1

Answer-

Calculation of Diluted Earning Per Share
	Amount
Profit Available For Equity Shareholders (A)	900,000
Add: Dividend Paid to Con. Preference Shares	100,000
Add: Interest paid on Convertible Bonds After Tax	140,000
(2,000,000 X 10%) X (1 - 30%)
Adjuted Profit ©	1,140,000
No. oF Equity Shares	200,000
No. oF Convt. Pref. Shares Converted into Equity Shares	40,000
No. oF Convt. Bonds Converted into Equity Shares ($2,000,000/$1000 X 50 Shares)	100,000
Total No. of Shares (D)	340,000
Diluted Earnings Per Share (C/D)	3.35