Information concerning the capital structure of Bedrock Mining, Inc. is as follows:

$20212022$

Common stock $90,000$ shares $90$ shares

Convertible preferred stock $10,000$ shares $10,000$ shares

$8\%,$ $$1,000$ par, convertible bonds $$1,000,000$ $$1,000,000$

During $2022,$ Bedrock Mining paid dividends of $$1$ per share on its common stock and $$2\mathrm{.}40$ per share on its preferred stock. The preferred stock is convertible into $20,000$ shares of common stock. The $8\%$ convertible bonds are convertible into $30,000$ shares of common stock. The net income for the year ended December $31,2022$ was $$285,000$ and the company$$s income tax rate was $21\%.$

Required:

$1.$ What was basic EPS, rounded to the nearest penny?

$2.$ What was diluted EPS, rounded to the nearest penny?

SOLUTION:

Basic EPS Diluted EPS

Common shares outstanding

Conversion of bonds

Conversion of preferred stock

Number of shares used in EPS computation

Net income as reported

After$-$tax interest on the bonds $($$$80,000$ x $$0\mathrm{.}79)$

Preferred dividends $($$$2\mathrm{.}40$ x $10,000$ shares$)$

Earnings used in EPS computation

Earnings per share