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4.         The following information was taken from the books and records of Apple, Inc.:            ...

4.         The following information was taken from the books and records of Apple, Inc.:

            Net income      $   270,000

            Capital structure:

            a.         Convertible 5% bonds. Each of the 300, $1,000 bonds is convertible

                        into 50 shares of common stock at the present date and for the next 10 years.         

            b.         $1 par common stock, 40,000 shares issued and outstanding

                        during the entire year.

            c.         Stock options outstanding to buy 11,000 shares of common stock

                        at $27 per share.

            Other information:

            a.         Bonds converted during the year        None

            b.         Income tax rate                                   30%

            c.         Convertible debt was outstanding the entire year

            d.         Average market price per share of common stock during the year    $30

            e.         Options were outstanding the entire year

            f.          Options exercised during the year      None

Compute basic earnings per share. (2 points)

Compute the diluted earnings per share. (5 points)

Business   Accounting   
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