Question

Culver Corporation had a net income for the current year ending December 31, 2018 of $1,150,000. Throughout 2018 the following items were outstanding:

?		440,000 common shares
?		21,000 Class A $3 cumulative preferred shares that were convertible to common shares at a rate of 1:1
?		49,000 Class B $4 non-cumulative preferred shares that were convertible at a rate of two preferred shares to one common share.
?		$470,000, 8% bonds that were convertible to 16,000 common shares
?		$330,000, 10% bonds convertible to 14,000 common shares

No dividends were declared or paid in 2018. Culver’s tax rate is 25%.

1. Calculate basic earnings per share. (For simplicity, ignore the requirement to record the debt and equity portions of the convertible bond separately).

2. Calculate diluted earnings per share. (For simplicity, ignore the requirement to record the debt and equity portions of the convertible bond separately).

Answer 1