Question

P16-8B (L07) (Computation of Basic and Diluted EPS) The information below pertains to Payson Company for 2018. Net income for the year $8,670,000 6% convertible bonds issued at par ($1,000 per bond); each bond is convertible into 60 shares of common stock 5,000,000 4% convertible, cumulative preferred stock, $100 par value; each share is convertible into 4 shares of common stock 2,500,000 Common stock, $1 par value 9,500,000 Tax rate for 2018 40% Average market price of common stock $18 per share There were no changes during 2018 in the number of common shares, preferred shares, or convertible bonds outstanding. There is no treasury stock. The company also has common stock options (granted in a prior year) to purchase 120,000 shares of common stock at $12 per share.

Instructions

(a) Compute basic earnings per share for 2018.

(b) Compute diluted earnings per share for 2018.

Answer 1