Calculate diluted earnings per share

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Question - Francis Company has 9,600 shares of common stock outstanding at the beginning of 2013. Francis issued 1,200 additional shares on May 1 and 800 additional shares on September 30. It also has two convertible securities outstanding at the end of 2013. These are:

Convertible preferred stock: 1,000 shares of 9.5%, \$50 par, preferred stock were issued on January 2, 2010, for \$55 per share. Each share of preferred stock is convertible into 2 shares of common stock. Current dividends have been declared and paid. To date, no preferred stock has been converted.

Convertible bonds: Bonds with a face value of \$100,000 and an interest rate of 6.5% were issued at par in 2012. Each \$1,000 bond is convertible into 25 shares of common stock. To date, no bonds have been converted.

Francis earned net income of \$50,000 during 2013. The income tax rate is 30%.

1. Calculate basic earnings per share for 2013, round to the nearest cent.

2. Calculate diluted earnings per share for 2013 and the incremental EPS of the preferred stock and convertible bonds. If required, round your answers to the nearest cent.

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