Tung Pet Food Suppliers reported$7,200,000 net income for the current year. The

Question

Tung Pet Food Suppliers reported$7,200,000 net income for the current year. The company indicated that it has $6,700,000, 6%convertible debt issued at par and $500,000 par value, 5% nonconvertible, cumulative preferred shares outstanding. The firm did not declare dividends for the current year. It issued the bonds on May 31 and the preferred shares were outstanding for the entire year. Based on this information, determine the numerator of the earnings per share fraction for both basic earnings per share and diluted earnings per share. Assume that all financial instruments described above are dilutive. The tax rate is 45%.

The numerator of the earnings per share fraction for the basic earnings per share is $ ?

.

The numerator of the earnings per share fraction for the basic earnings per share is $ ?

.

Explanation / Answer

numerator of basic EPS:

Numerator of diluted EPS:

Net income 72,00,000 Less preferred dividends =500000*5% = 25000 Earnings available to equity shareholders = 71,75,000

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