Information concerning the capital structure of Piper Corporation is as follows:
ID: 2469282 • Letter: I
Question
Information concerning the capital structure of Piper Corporation is as follows:
December 31,
2015 2014
Common stock 150,000 shares 150,000 shares
Convertible preferred stock 15,000 shares 15,000 shares
6% convertible bonds $2,400,000 $2,400,000
During 2015, Piper paid dividends of $0.60 per share on its common stock and $1.50 per share on its preferred stock. The preferred stock is convertible into 30,000 shares of common stock. The 6% convertible bonds are convertible into 75,000 shares of common stock. The net income for the year ended December 31, 2015, was $300,000. Assume that the income tax rate was 30%.
What should be the diluted earnings per share for the year ended December 31, 2015, rounded to the nearest penny?
Explanation / Answer
Net Income - as given $3,00,000 Add: Interest on bonds $1,44,000 Less: Income tax on Bonds Interest $43,200 Ammended Net Income $4,00,800 Shares - issued presently 1,50,000 Add: Converted shares of Preferred stock 30,000 Converted shares of Bonds 75,000 Total shares 2,55,000 Dilluted earnings per share $1.57