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Better Home, Inc. has net income (30% tax rate) of $1,800,000 for an average number of...

Better Home, Inc. has net income (30% tax rate) of $1,800,000 for an average number of shares outstanding during the year of 500,000 shares. The corporation issued $ 2,000,000 par value of 10-year, 9% convertible bonds on January 1, 2016 at a $180,000 discount. The convertible bonds are convertible into 70,000 shares of common stock . Compute the earnings per share data , excluding any note if required?

Show works computation on Diluted Earnings per share by formula. please.

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Answer #1

Net Income = $ 18,00,000

Number of Shares outstanding = 5,00,000

Interest on Bonds per year = 20,00,000 * 9%

= $ 1,80,000

Discount on issue of Bonds = $ 18,000

Assuming Straight line method of Amortization, amount to be amortized per year = 18,000 / 10 = $ 1,800

Number of shares oustanding after conversion = 5,00,000 + 70,000 = 5,70,000

Tax Rate = 30%

Diluted EPS = (18,00,000 + [0.7{1,80,000 + 1,800}]) / 5,70,000

= 19,27,260 / 5,70,000

= $ 3.38 ( Approximately )

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