Mininova Corporation is preparing earnings per share data for 2017. The net income for the year ended December 31, 2017 was $400,000 and there were 60,000 common shares outstanding during the entire year. Mininova has the following two convertible securities outstanding:
10% convertible bonds (each $1,000 bond is convertible into 25 common shares) ..... $100,000
5% convertible $100 par value preferred shares (each share is convertible into two common shares) ................................................................................................ $50,000
Both convertible securities were issued at face value in 2014. There were no conversions during 2017, and Mininova's income tax rate is 24%. The preferred shares are cumulative. For simplicity, ignore the requirement to record the debt and equity components of the bonds separately.
Instructions
(a) Calculate Mininova's basic earnings per share for 2017.
(b) Calculate Mininova's diluted earnings per share for 2017.
(c) Recalculate Mininova's basic and diluted earnings per share for 2017, assuming instead that the preferred shares pay a 14% dividend.