Dynamic Motors, Inc. has two potentially dilutive securities. Loss from continuing operations for the year is $(250,000), income from discontinued operations is $100,000 (net of tax), and the weighted average common shares outstanding is 100,000 shares. Also outstanding during the year are $5,000,000 of 6% bonds convertible into 10,000 shares of common stock. The bonds also have two detachable stock warrants for each bond which allow the bondholder to buy a share of stock for $30. The average market price of Dynamic Motors stock was $28 for the year. The tax rate is 40%.
Required: Write the basic equation for EPS and compute basic EPS. Using the order of entry, determine diluted EPS calculations. Show all computations to prepare the appropriate Income Statement presentation of basic and diluted EPS.

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The Answer of Dynamic Motors, Inc. has two potentially dilutive securities. Loss from continuing operations for the year is $(250,000), income from discontinued operations is $100,000 (net of tax), and the weighted average common shares outstanding is 100,000 shares. Also outstanding during the year are $5,000,000 of 6% bonds convertible into 10,000 shares of common stock. The bonds also have two detachable stock warrants for each bond which allow the bondholder to buy a share of stock for $30. The average market price of Dynamic Motors stock was $28 for the year. The tax rate is 40%.
Required: Write the basic equation for EPS and compute basic EPS. Using the order of entry, determine diluted EPS calculations. Show all computations to prepare the appropriate Income Statement presentation of basic and diluted EPS.