Bridgeport Corporation earned net income of $466,800 in 2020 and had 91,000 shares of common stock outstanding throughout the year. Also outstanding all year was $850,000 of 5% bonds, which are convertible into 19,000 shares of common. Bridgeport’s tax rate is 20 percent.
Compute Bridgeport’s 2020 diluted earnings per share. (Round answer to 2 decimal places, e.g. 3.55.) Diluted earnings per share $enter diluted earnings per share in dollars rounded to 2 decimal places
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Bridgeport’s 2020 diluted earnings per share is calculated as follows:
Diluted earnings per share = (Net income + After tax interest on convertible bond) / (Total number of shares outstanding + Dilluted shares)
After tax interest on convertible bond = $850,000 * 5% * (1 - 0.2)
= $34,000
Dilluted shares = 19,000 shares
Diluted earnings per share = ( $466,800 + $34,000) / ( 91,000 shares + 19,000 shares )
= $500,800 / 110,000 shares
= $4.55
Bridgeport’s 2020 diluted earnings per share is $4.55
Bridgeport Corporation earned net income of $466,800 in 2020 and had 91,000 shares of common stock...
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