Compute diluted earnings per share

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Question - In 2019, Sheffield Enterprises issued, at par, 60 $1,000, 8% bonds, each convertible into 100 shares of common stock. Sheffield had revenues of $19,500 and expenses other than interest and taxes of $9,500 for 2020. (Assume that the tax rate is 20%.) Throughout 2020, 1,600 shares of common stock were outstanding; none of the bonds was converted or redeemed.

(a) Compute diluted earnings per share for 2020.

(b) Assume the same facts as those assumed for part (a), except that the 60 bonds were issued on September 1, 2020 (rather than in 2019), and none have been converted or redeemed. Compute diluted earnings per share for 2020.

(c) Assume the same facts as assumed for part (a), except that 20 of the 60 bonds were actually converted on July 1, 2020. Compute diluted earnings per share for 2020.

Reference no: EM132822179

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