Question
Strickland Corporation earned net income of $300,000 (after taxes at a rate of 40%) in 2017. It had 100,000 shares of common stock outstanding all
Strickland Corporation earned net income of $300,000 (after taxes at a rate of 40%) in 2017. It had 100,000 shares of common stock outstanding all year, and 50,000 shares of preferred stock, non-convertible, non-cumulative. Dividends of $20,000 were declared and paid on the preferred.
The company also had $400,000 of 10% convertible bonds (sold at par value) convertible into 16,000 shares of common stock.
The company had outstanding stock options for 5,000 shares of common stock at an exercise price of $20. The average market price during the year was $40.
Compute basic earnings per share.
Identify whether the BONDS are dilutive or anti-dilutive, showing computations to support your answer.
Compute diluted earnings per share.
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