The following information has been provided to you by the Rae Corporation for the year ending December 31,2015:
• Net income was $979,000.
• Cash dividends totaling $120,000 were paid to the common shareholders.
• 6% convertible bonds with a par value of $2,000,000 were issued on February 1,2015.
• The corporation's marginal income tax rate is 40%.
• 6% convertible preferred stock with a par value of $800,000 was outstanding during the entire year.
Assuming that both the bonds and preferred stock are dilutive,what is the numerator that should be used in the calculation of basic earnings per share and diluted earnings per share?

Question

Quizplus · Accepted Answer

Basic EPS = $979,000 - $48,000 ($800,000 × .06)= $931,000Diluted EPS = $979,000 + $66,000 ($2,000,000 × .06 × 11/12 × .6)= $1,045,000

The Following Information Has Been Provided to You by the Rae