Rhonda Company had 40, 000 shares of common stock outstanding during 2010 and compensatory stock options to purchase 5, 000 shares of common stock at $10 a share plus a $3 a share unrecognized compensation cost (net of tax).The average market price is $20 a share.The company also had 7% convertible preferred stock on which dividends of $9, 000 were declared.Each preferred share is convertible into 6, 000 common shares.Rhonda's after-tax net income was $88, 000, and the tax rate was 40%.
Required:
Compute 2010 diluted earnings per share for Rhonda Company.

Question

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The Answer of Rhonda Company had 40, 000 shares of common stock outstanding during 2010 and compensatory stock options to purchase 5, 000 shares of common stock at $10 a share plus a $3 a share unrecognized compensation cost (net of tax).The average market price is $20 a share.The company also had 7% convertible preferred stock on which dividends of $9, 000 were declared.Each preferred share is convertible into 6, 000 common shares.Rhonda's after-tax net income was $88, 000, and the tax rate was 40%.
Required:
Compute 2010 diluted earnings per share for Rhonda Company.

Rhonda Company Had 40, 000 Shares of Common Stock Outstanding