Question

Use the following information to answer the next two questions:

Lerner Co had the following outstanding for the year:

200,000 shares of common stock

20,000 shares of convertible preferred stock - convertible into 40,000 shares of common stock

$500,000 of 10% convertible bonds - each $1,000 bond is convertible into 45 shares of common stock

During 2015, Lerner paid dividends of $.45 per share on the common stock and $1.50 per share on the preferred stock.

The net income for 2015 was $300,000 and the income tax rate was 30%.

How much are basic earnings per share (rounded to the nearest penny)?

$1.35

$1.25

$1.21

$1.11

How much are diluted earnings per share for 2015 (rounded to the nearest penny)?

$1.33

$1.28

$1.16

$1.14

Please show all work so I can understand.

Answer 1