At December 31, 2011, the financial statements of Hollingsworth Industries inclu

Question

At December 31, 2011, the financial statements of Hollingsworth Industries included the following:
Net income for 2011 $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 2009. The tax rate for 2011 was 40%

Required:
Compute basic and diluted EPS for the year ended December 31, 2011.

Explanation / Answer

Net Income for 2011 = $560,000,000

Common Stock = $300,000,000

Shares outstanding on January 400,000,000

Treasury shares purchased for cash on September 1 30,000,000

EPS = [Net Income of 2011 / Shares outstanding in 2011]

Number of shares outstanding (2011):

Convertible shares of common stock                   36,000,000

Shares outstanding on January 1                        400,000,000

Less: Treasury shares purchased                        (30,000,000)

Net Outstanding shares                                  406,000,000                 

EPS for the year ended December 31, 2011 = [$560,000,000 / 406,000,000]

EPS for the year ended December 31, 2011 = $1.38 per share

EPS for the year ended December 31, 2011 = $1.38 per share

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