Question
On January 1, 2017, Crocker Company issued 10-year, $2,000,000 par value, 6% bonds, at par. Each $1,000 bond is convertible into 15 shares of common
On January 1, 2017, Crocker Company issued 10-year, $2,000,000 par value, 6% bonds, at par. Each $1,000 bond is convertible into 15 shares of common stock. Net income in 2017 was $300,000, and the tax rate was 40%. The company had 100,000 shares of common stock outstanding throughout the year.
Instructions
(a)Compute diluted EPS for 2017.
(b)Compute diluted EPS for 2017, assuming the same facts as above, except that $1,000,000 of 6% noncumulative, convertible preferred stock was issued instead of the bonds. Each $100 preferred stock is convertible into 5 shares of common stock. No dividends were declared.
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