Pearl Corporation earned net income of 319740 in 2017 and ha

Pearl Corporation earned net income of $319,740 in 2017 and had 99,000 shares of common stock outstanding throughout the year. Also outstanding all year was $828,000 of 9% bonds, which are convertible into 20,000 shares of common. Pearl’s tax rate is 50 percent. Compute Pearl’s 2017 diluted earnings per share. (Round answer to 2 decimal places, e.g. 3.55.) Diluted earnings per share $

Solution

Interest on bonds after tax = 828000*9%*(1-0.50) = 37,260.

Shares after conversion = 99000+20000 = 119,000

Diluted EPS = Net income + Interest after tax/ total Number of shares

= 3,19,740+37,260/119000

= $3