Throughout the calendar year $2020,$ Kali Corporation has $400,000$ common shares

outstanding $($no preferred shares issued$).$ In addition, Collie has $5,000,20-$year, $7\%$

bonds outstanding, issued at par in $2018.$ Each $ $1,000$ bond is convertible into $20$

common shares after June $30,2021.$ Collie reported net income of $ $600,000$ for

calendar $2020.$ Their income tax rate is $30\%.$

Required:

Calculate basic and diluted earnings per share for $2020.$

Solution: Please explain the solution

Basic earnings per share: $=$ $ $1\mathrm{.}50$

Incremental effect of conversion of bonds

$=$ $ $2\mathrm{.}45$

The conversion of the bonds would be antidilutive. No diluted EPS calculation is

required. The basic and diluted earnings per share of $ $1$