Terrell Foods reported $870,000 in net income and its weighted average shares outstanding for the year is 200,000 shares. In prior years it sold $1,500,000 of 8% long-term convertible bonds at par which are still outstanding. The bonds are convertible into 10,000 shares of common stock. The tax rate for all years is 40%. If Terrell has no other potentially dilutive securities and no preferred stock, and no conversions occur during the year, what are basic and diluted EPS? (Round your final answers to the nearest cent.)

Question

Quizplus · Accepted Answer

The correct answer is A.Basic EPS = Net income / Weighted average shares outstanding = $870,000 / 200,000 shares = $4.35Diluted EPS = Net income / (Weighted average shares outstanding + Dilutive securities) = $870,000 / (200,000 shares + 10,000 shares) = $4.49

Terrell Foods Reported $870,000 in Net Income and Its Weighted