Net income for 2009 560 million Bonds Payable ,10% convertible into 36 million s

Question

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

The bonds payable were issued at par in 2007 .The tax rate for 2009 was 405

Compute basic and diluted earning per share for the year ended Dec 31,2009

Explanation / Answer

Net income for 2009 = 560 Million Tax 40 % = 560 *40% Tax = 224 Net income after Tax = 560 - 224 Net income after Tax = 336 Million Shares on January = 400 Million Earning per Share = Net income / Number of shares out standing = 336 / 400 Basic Earning per Share = 0.84 After Bonds Convertion Net income after Tax = 336 Million Shares on January = 400 Million Convertible Bonds = 36 Million Total shares out standing = 436 Million Earning per Share = Net income / Number of shares out standing = 336 / 436 = 0.77 After Treasury Shares Purchase Net income after Tax = 336 Million Total shares out standing = 436 Million Less: Treasury Stock = 30 Million Total shares out standing = 406 Million Earning per Share = Net income / Number of shares out standing = 336 / 406 Dailuted Earning per Share = 0.828 Note: I treated 40% tax rate. Thank you.... Net income for 2009 = 560 Million Tax 40 % = 560 *40% Tax = 224 Net income after Tax = 560 - 224 Net income after Tax = 336 Million Shares on January = 400 Million Earning per Share = Net income / Number of shares out standing = 336 / 400 Basic Earning per Share = 0.84 After Bonds Convertion Net income after Tax = 336 Million Shares on January = 400 Million Convertible Bonds = 36 Million Total shares out standing = 436 Million Earning per Share = Net income / Number of shares out standing = 336 / 436 = 0.77 After Treasury Shares Purchase Net income after Tax = 336 Million Total shares out standing = 436 Million Less: Treasury Stock = 30 Million Total shares out standing = 406 Million Earning per Share = Net income / Number of shares out standing = 336 / 406 Dailuted Earning per Share = 0.828

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