On December 31, 2018, Heffner Companys net income was $540,000 and the income tax rate was 40%. The company had 100,000 shares of common stock outstanding throughout 2018. None of the dilutive securities had been converted or exercised during the year. (Round all your numbers to two decimal places)

1. 5,000 bonds (6%) were issued at par ($1,000 par per bond) on January 1, 2018. Each bond is convertible into shares of common stock (8 points).

Computer basic earnings per share for Heffner Co. for 2018.

Basic EPS =

Determine whether the convertible bonds are dilutive or anti-dilutive and show your computations.

Additional shares assumed converted =

Interest expenses, net of tax (savings) =

Incremental EPS =

If dilutive, then compute diluted earnings per share for Heffner Co. for 2018.

2. On January 1, 2018, 3,000 shares of 7%, $100 par per share, converted preferred stock was issued. Each preferred share is convertible into 2 shares of common stock

(8 points).

Compute basic earnings per share for Heffner Co. for 2018.

Preferred Dividends =

Basic EPS =

Determine whether the convertible preferred stock is dilutive or anti-dilutive and show your computations.

Additional shares assumed converted =

Incremental EPS =

If dilutive, then compute earnings per share for Heffner Co. for 2018.

Dilutive EPS =

3. Assume that 50,000 options were issued at $40 during 2017. Each option is convertible into one share of common stock. During 2018, the average market price of the common shares was $50 with a closing price of $51 on December 31,2018. (10 points)

Compute basic earnings per share for Heffner Co. for 2018.

Basic EPS =

Determine whether the stock options are dilutive or anti-dilutive and provide an explanation for your response.

If dilutive, then compute diluted earnings per share for Heffner Co. for 2018.

Share assumed issued:
Less: Treasure share assumed purchased*
Incremental shares:

*Treasure shares assumed purchased = Proceeds / average market price =

Dilutive EPS =