Rockland Corporation earned net income of $433,500 in 2012 and had 100,000 share

Question

Rockland Corporation earned net income of $433,500 in 2012 and had 100,000 shares of common stock outstanding throughout the year. Also   outstanding all year was $1,156,000 of 10% bonds, which are convertible into 23,120 shares of common. Rockland's tax rate is 40 percent.   Compute Rockland's 2012 diluted earnings per share. (Round answer to 2 decimal places, e.g. 2.13.)

ABE16-12 Rockland Corporation earned net income of $433,500 in 2012 and had 100,000 shares of common stock outstanding throughout the year. Also outstanding all year was $1,156,000 of 10% bonds, which are convertible into 23,120 shares of common. Rockland's tax rate is 40 percent. Compute Rockland's 2012 diluted earnings per share.

Explanation / Answer

Diluted EPS = net income / (common shares + convertible shares) = 433,500 / (100,000+23,120) = 3.52

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