In 2013, Digital Inc. issued $75,000 of 8% bonds at par, with each $1,000 bond being convertible into 100 common shares. The company had revenues of $17,500 and expenses of $8,400 for 2014, not including interest and tax (assume a tax rate of 30%). Throughout 2014, 2,000 common shares were outstanding, and none of the bonds were converted or redeemed. (For simplicity, assume that the convertible bonds' equity element is not recorded.)

Instructions

(a) Calculate diluted earnings per share for the year ended December 31, 2014.

(b) Repeat the calculation in (a), but assume that the 75 bonds were issued on September 1, 2014 (rather than in 2013), and that none have been converted or redeemed.