The company had 50,000 shares of common stock outstanding throughout the year. In addition, as of January

Question:

The company had 50,000 shares of common stock outstanding throughout the year. In addition, as of January 1, the company had issued 100 convertible bonds ($1,000 face value, 10%). The company has no other potentially dilutive securities. Net income for the year was $100,000. The income tax rate is 30%. Compute diluted earnings per share, assuming that

(1) Each bond was convertible into 50 shares of common stock and

(2) Each bond was convertible into 20 shares of common stock.

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on...