9. Question ID: HTB 2.1.015 (Topic: Profitability Ratios III: Diluted Earnings per Share) Information concerning the capital structure of the Petrock Corp. is as follows: 12/31/20X1 12/31/20X2 Common stock 90,000 shares 90,000 shares Convertible preferred stock 10,000 shares 10,000 shares 8% convertible bonds $1,000,000 $1,000,000 During 20X2, Petrock paid dividends of $1 per share on its common stock and $2.40 per share on its preferred stock. The preferred stock is convertible into 20,000 shares of common stock. The 8% convertible bonds are convertible into 30,000 shares of common stock. The net income for the year ending December 31, 20X2, was $285,000. Assume that the income tax rate is 30%. What should be the diluted EPS for the year ending December 31, 20X2, rounded to the nearest penny?
Added by Neha R.
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This is done by dividing the net income by the number of common shares. In this case, the net income is $285,000 and the number of common shares is 90,000. So, the basic EPS is $285,000 / 90,000 = $3.17. Show more…
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