Reference no: EM132505104

As a new accountant at MLJ Company, you have been tasked with calculating basic and diluted earnings per share as part of preparing the 2018 annual financial statements. You gather the following information necessary for your task:

1.  MLJ has net income for 2018 of $1,330,000
2. MLJ has $2,090,000 of 8% convertible bonds outstanding. The bonds were issued in 2017 at par ($1,000 per bond) and each bond is convertible into 30 shares of common stock.
3. MLJ has 38,300 shares of 6% convertible, cumulative preferred stock outstanding that was issued in 2016. The preferred shares have a $100 par value and each share is convertible into 3 shares of common stock
4. MLJ has $6,110,000 of $10 par value common stock outstanding. You breathe a sigh of relief when you find out that there were no changes during 2018 in the number of common shares outstanding. Further, there is no treasury stock.
5. MLJ has outstanding stock options belonging to Mrs. MLJ that allow her to purchase 80,600 shares of common stock at $20 per share. The stock options were part of Mrs. MLJ's compensation in a prior year.
6. MLJ's tax rate for 2018 is 40%
7. The average market price of MLJ's common stock during 2018 was $25 per share

Question a. Compute MLJ'S basic EPS

Question b. Compute MLJ'S Diluted EPS