Reference no: EM133067934
Question - The Ehrlich Corporation issued 10-year, $5,000,000 par, 7% callable convertible bonds on January 2, 2020. The bonds have a par value of $1,000, with interest payable annually. The current conversion ratio is 18:1, At the date of issue, the bonds were sold at 100. Ehrlich's effective tax was 20%. Net income in 2020 was $9,500,000, and the company had 2,000,000 shares outstanding during the entire year.
Required -
a. Prepare a schedule to compute both basic and diluted earnings per share.
b. Recompute the schedule as if the security was convertible preferred stock, $5,000,000, 8%, $100 par value, cumulative. Each share of preferred stock is convertible into 1 share of common stock.
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