6. Earnings per Share with Convertible Bonds

On January 1, 2019, Houston Company issued, at par, 600 $1,000 6% bonds. Each bond is convertible into 10 shares of common stock. Houstons net income for 2019 was $600,000. The tax rate was 20%. Throughout 2019, 100,000 shares of $10 par common stock were outstanding. In addition, 1,000 shares of 5% $100 par cumulative preferred stock were outstanding. No preferred stock dividends were declared during 2019. None of the bonds were converted in 2019.

Instructions: (a) Compute basic earnings per share for 2019. (b) Compute diluted earnings per share for 2019.