Question
Average Joes Gym is a calendar-year corporation. At December 31, 2015, 800,000 common shares were outstanding. On April 1, 2015, an additional 400,000 common shares
Average Joes Gym is a calendar-year corporation. At December 31, 2015, 800,000 common shares were outstanding. On April 1, 2015, an additional 400,000 common shares were issued, for a total of 1,200,000 common shares outstanding at December 31, 2015. Average Joes also issued $600,000 of 20-year, 8% convertible bonds at par on July 1, 2015. Each $1,000 bond converts to 40 shares of common stock at any interest date. None of the bonds were converted during 2015. Average Joes net income for the year ended December 31, 2015 is $1,540,000, and the corporate tax rate is 40%. Use the following outline to calculate Average Joes basic and diluted earnings per share for the year ended December 31, 2015, if you choose. Feel free to construct your own worksheet.
Calculation of Weighted Average Shares
Earnings per share (basic) __________
Weighted average shares __________
8% bonds converted __________
Weighted average shares AS IF __________
Net income __________
Interest on 8% bonds __________
Additional corporate tax __________
Adjusted net income __________
Earnings per share (diluted) __________
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