PROBLEM 2. The following information was taken from the books and records of Legg, Inc.:

- Net Income = $480,000

- Capital structure:

A. Convertible 6% bonds. Each of the 300, $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.

- 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

1. Compute basic and diluted earnings per share.