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The following applies to the ABC Corp for 2010:

1. The following applies to the ABC Corp for 2010:
Transactions in Common Shares Change Outstanding

1/1/10, Beginning Shares Outstanding 1,000,000
3/1/10, Purchase of Treasury Shares (60,000) 940,000
6/1/10, Stock Split 2-for-1 940,000 1,880,000
11/1/10, Issuance of Additional Shares
120,000 2,000,000

Outstanding Stock Options (Granted in 2008)

Options for 60,000 shares exercisable at the option price of $25 per share. Average 2010 market price was $30 per share. (Market price and option price already adjusted for stock split).

Convertible Bonds (Issued December 1, 2010)

$5 million of 4% bonds convertible to 400,000 shares of common stock.

Net income in 2010 was $3,200,000. ABC’s tax rate is 35%

A) Compute the basic earnings per share for 2010.
B) Compute the diluted earnings per share for 2010.
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Net Income
Outstanding shares
Basic EPS Basic EPS
1.60 B)
If Bonds are converted into shares, then there will be no interest payment to bondholders
Net Income
Add: Post tax...

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