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ABC incorporation reported the following data for the year 2017:

Accountancy Q6.png

Additional information:

 

·      Each bond is convertible into 40 shares of common stock and issued at par.

·      The preferred stock is cumulative, each share of preferred stock is convertible into 3 shares of common stock.

·      Number of bonds outstanding, preferred shares, and common shares has not changed during 2017.

·      Under common stock options, company can purchase 79,600 shares of common stock at $15 per share. These options are granted in prior year.

·      Treasury stock balance is zero.

 

There is no treasury stock. The company also has common stock options (granted in a prior year) to purchase 79,600 shares of common stock at $15 per share.

 

Requirements:

 

a. Calculate basic earnings per share

 

b. Calculate diluted earnings per share

Accountancy Q6.png

ABC incorporation reported the following data for the year 2017: “In
Net income $1,274,000
9% convertible bonds ($1,000 per bond) $2,113,000
7% convertible, $100 par value $4,085,000
Common stock, $10 par value $6,060,000
2017 tax rate 40% Average market price of common stock $25 per share

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