Homework Problem

The following information was taken from the books and records of Ludwick, Inc.:

1. Net income $ 280,000

2. Capital structure:

a. Convertible 6% bonds. Each of the 300,000 $1,000 bonds is convertible

into 50 shares of common stock at the present date and for the next 10 years 300,000

b. $10 par common stock, 200,000 shares issued and outstanding during the entire year 2,000,000

c. Stock warrants outstanding to buy 16,000 shares of common stock at $20 per share

3. Other information:

a. Bonds converted during the year None

b. Income tax rate 30%

c. Convertible debt was outstanding the entire year

d. Average market price per share of common stock during the year $32

e. Warrants were outstanding the entire year

f. Warrants exercised during the year None

Instructions

Compute basic and diluted earnings per share.

** Please show detailed work.