Hoffman Corporation had net income for the year of $480,000 and a weighted-average number of common shares outstanding during the period of 200,000 shares. The company has a convertible bond issue outstanding. The bonds were issued four years ago at par ($2,000,000), carry a 7% interest rate, and are convertible into 40,000 shares of common stock. The company has a 40% tax rate. Diluted earnings per share are
A) $1.65.
B) $2.23.
C) $2.35.
D) $2.58.

Question

Quizplus · Accepted Answer

[$480,000 + ($2,000,000 × .07 × .60)] ÷ (200,000 + 40,000) = $2.35.

Hoffman Corporation Had Net Income for the Year of $480,000