Question
1. On January 1, 2020, Carla Company issued 10-year, $2,150,000 face value, 6% bonds, at par. Each $1,000 bond is convertible into 16 shares of
1. On January 1, 2020, Carla Company issued 10-year, $2,150,000 face value, 6% bonds, at par. Each $1,000 bond is convertible into 16 shares of Carla common stock. Carlas net income in 2020 was $518,950, and its tax rate was 20%. The company had 97,000shares of common stock outstanding throughout 2020. None of the bonds were converted in 2020.
(a) Compute diluted earnings per share for 2020. (Round answer to 2 decimal places, e.g. $2.55.)
(b) Compute diluted earnings per share for 2020, assuming the same facts as above, except that 970,000 of 6% convertible preferred stock was issued instead of the bonds. Each $100 preferred share is convertible into 5 shares of Carla common stock. (Round answer to 2 decimal places, e.g. $2.55.)
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