Brief Exercise 16-13 Tamarisk Corporation earned net income of $370,000 in 2017

Question

Brief Exercise 16-13 Tamarisk Corporation earned net income of $370,000 in 2017 and had 108,000 shares of common stock outstanding throughout the year. Also outstanding all year was $840,000 of 9% bonds, which are convertible into 20,000 shares of common. Tamarisk's tax rate is 40 percent. Compute Tamarisk's 2017 diluted earnings per share. (Round answer to 2 decimal places, e.g. 3.55.) Diluted earnings per share Click if you would like to Show Work for this question: Open Show Work LINK TO TEXT

Explanation / Answer

Diluted net income = $370,000 + ($840,000 x 9%) (1-0.4) = $415,360
Potential common stock = 20,000

Diluted earnings per share = $415,360 / (108,000 + 20,000) = $3.25 per share

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