On January 1, 2014, Crocker Company issued 10-year, $3,659,000 face value, 6% bonds, at par. Each $1,000 bond is convertible into 23 shares of…

On January 1, 2014, Crocker Company issued 10-year, $3,659,000 face value, 6% bonds, at par. Each $1,000 bond is convertible into 23 shares of Crocker common stock. Crocker’s net income in 2014 was $280,000, and its tax rate was 45%. The company had 102,000 shares of common stock outstanding throughout 2014. None of the bonds were converted in 2014.

(a) Compute diluted earnings per share for 2014. (Round answer to 2 decimal places, e.g. $2.55.)

Diluted earnings per share$1.96

(b) Compute diluted earnings per share for 2014, assuming the same facts as above, except that $1,020,000 of 6% convertible preferred stock was issued instead of the bonds. Each $100 preferred share is convertible into 5 shares of Crocker common stock. (Round answer to 2 decimal places, e.g. $2.55.)

Diluted earnings per share$1.83

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