During the current year, High Corporation had 3 million shares of common stock outstanding. Five thousand, $1,000, 6% convertible bonds were issued at face amount at the beginning of the year. High reported income before tax of $4 million and net income of $2.4 million for the year. Each bond is convertible into ten shares of common. What is diluted EPS?
A)$.85.
B)$.86.
C)$.80.
D)$.79.

Question

Quizplus · Accepted Answer

Diluted EPS = Net income / (Weighted average number of shares outstanding + (Convertible bonds x Conversion ratio))= 2,400,000 / (3,000,000 + (5,000 x 10))= 2,400,000 / 350,000= $0.85

During the Current Year, High Corporation Had 3 Million Shares