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Compute the diluted earnings per share

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Reference no: EM131812736

Question - The following data for the Dojo Company for 2012 is available:

Net Income (after taxes) $2,100,000

Tax Rate 40%

Transactions in Common Shares Change Cumulative

Jan. 1, 2012, Beginning number 700,000

Mar. 1, 2012, Purchase of treasury shares (60,000) 640,000

June 1, 2012, Stock split 2-1 640,000 1,280,000

Nov. 1, 2012, Issuance of shares 120,000 1,400,000

8% Cumulative Convertible Preferred Stock

Sold at par in 2010, convertible into 200,000 shares of common (adjusted for split). $1,000,000

Stock Options

Exercisable at the option price of $25 per share. Average

market price in 2012, $30 (market price and option price adjusted for split). 60,000 shares

8% Bonds Payable

Issued 1,000 nonconvertible debenture bonds at 99, 8% paid annually on 12/31, $1000 maturity (each bond), issued on 1/1/12.

Instructions

(a) Compute the basic earnings per share for 2012.

(b) Compute the diluted earnings per share for 2012.

Reference no: EM131812736

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