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Compute both basic and diluted earnings per share

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Question - The Indigo Corporation issued 10-year, $4,890,000 par, 7% callable convertible subordinated debentures on January 2, 2017. The bonds have a par value of $1,000, with interest payable annually. The current conversion ratio is 14:1, and in 2 years it will increase to 16:1. At the date of issue, the bonds were sold at 96. Bond discount is amortized on a straight-line basis. Indigo's effective tax was 35%. Net income in 2017 was $8,550,000, and the company had 1,980,000 shares outstanding during the entire year.

(a) Compute both basic and diluted earnings per share.

Reference no: EM131623905

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