Colson Corp. had $800,000 net income in 2018. On January 1, 2018 there were 200,000

shares of common stock outstanding. On April 1, 20,000 shares were issued and on September

1, Colson bought 30,000 shares of treasury stock. There are 30,000 options to buy common

stock at $40 a share outstanding. The market price of the common stock averaged $50 during

2018. The tax rate is 40%.

During 2018, there were 40,000 shares of convertible preferred stock outstanding. The

preferred is $100 par, pays $3.50 a year dividend, and is convertible into three shares of

common stock.

Colson issued $2,000,000 of 8% convertible bonds at face value during 2017. Each $1,000

bond is convertible into 30 shares of common stock.

Instructions:

Compute diluted earnings per share for 2018. Complete the schedule and show all

computations.

Security Net Income Adjustment Adjusted Net income Shares Adjustment Adjustment Shares EPS