c16BProblems.indd

The information below pertains to Payson Company for 2015.

Net income for the year 6% convertible bonds issued at par ($1,000 per bond); each bond is convertible into

60 shares of common stock 4% convertible, cumulative preferred stock, $100 par value; each share is convertible

into 4 shares of common stock Common stock, $1 par value Tax rate for 2015 Average market price of common stock

$8,670,000

5,000,000

2,500,000 9,500,000 40% $18 per share

There were no changes during 2015 in the number of common shares, preferred shares, or convertible bonds outstanding. There is no treasury stock. The company also has common stock options (granted in a prior year) to purchase 120,000 shares of common stock at $12 per share.

Instructions

(a) Compute basic earnings per share for 2015. (b) Compute diluted earnings per share for 2015.