At December 31, 2009, the financial statements of Hollingsworth Industries inclu

Question

At December 31, 2009, the financial statements of Hollingsworth Industries included the following:
Net income for 2009 - $560 million
Bonds payable, 10%, convertible into 36 million shares of common stock - $300 million
Common stock:
Shares outstanding on January 1 - 400 million
Treasury shares purchased for cash on September 1 - 30 million
Additional data:
The bonds payable were issued at par in 2007. The tax rate for 2011 was 40%

Required:
Compute basic and diluted EPS for the year ended December 31, 2009

Explanation / Answer

Net income for 2009 560 millions shares outstanding on january 1 400 millions Earning per share=netincome/weighted average common shares outstanding Earning per share=560/400 1.4 Diluted EPS Net income 560 millions shares outstanding 400 millions Treasury shares purchased 30 millions bonds convertableinto common stock 36 millions Total shares outstanding 466 millions EPS=net income/outstanding shares EPS=560/466 1.2

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