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Compute diluted earnings per share

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Question - Careful Carol's Creamy Crumpets had $200,000 shares of common stock outstanding at 12/21/2020. On April 1, 2020, the company issued an additional 50,000 shares. On July 31, 2020, the company purchased 10,000 shares as treasury stock. On November 30, 2020, the company declared 5% stock dividend. The company reported net income for 2020 of $257,000.

a) Compute basic earnings per share (EPS).

The following additional information is available: Stock options - The company had 30,000 scot options outstanding that were exercisable throughout the period at a strike/exercise price $13 per share. The average market price of the company's stock during 2020 was $10 per share.

Convertible bonds - The company had 350,000 of 6% convertible bonds outstanding which was outstanding throughout the year. The bonds are convertible into 20,000 shares of the company's stock. The company's tax rate is 25%.

b) Compute diluted earnings per share (EPS).

Reference no: EM132975779

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