On January 2, 2011, McGregor Co. issued at par $45,000 of 9% bonds convertible in total into

Question:

On January 2, 2011, McGregor Co. issued at par $45,000 of 9% bonds convertible in total into 4,000 shares of McGregor’s common stock. No bonds were converted during 2011. Throughout 2011, McGregor had 10,000 shares of common stock outstanding.

McGregor’s 2011 net income was $75,000. McGregor’s tax rate is 30%. No other potentially dilutive securities other than the convertible bonds were outstanding during 2011. For 2011, compute McGregor’s basic and diluted EPS.

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on...