On January 1, 2020, Wildhorse Inc. issued $2.35 million of face value, fiveyear, 6% bonds at par. Each $1,000 bond is convertible into 16 common shares. Wildhorses net income in 2020 was $242,000, and its tax rate was 25%. The company had 100,000 common shares outstanding throughout 2020. None of the bonds were exercised in 2020. For simplicity, ignore the requirement to record the bonds debt and equity components separately.

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Calculate diluted earnings per share for the year ended December 31, 2020. (Round answer to 2 decimal places, e.g. 15.25.)

Diluted earnings per share

$enter Diluted earnings per share in dollars

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Solution

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Calculate diluted earnings per share for 2020, assuming the same facts as above, except that $2.5 million of 6% cumulative convertible preferred shares was issued instead of the bonds. Each $100 preferred share is convertible into 4 common shares. (Round answer to 2 decimal places, e.g. 15.25.)

Diluted earnings per share