Shaffer Corporation issued 100, $1,000, 10 percent convertible bonds in 2016 at face value. Each bond is convertible into 100 shares of common. Shaffer's net income from continuing operations for 2017 is $1,824,000 ($3,040,000 before tax). The $1,824,000 reflects one year's interest after tax. If you consider all factors except convertible bonds, average common shares outstanding for 2017 are 1,010,000.
Required:
1. Compute DEPS (test for dilution).
2. How would you answer (1) if the bonds were issued July 1, 2017?
3. Ignoring (2), how would the answer to (1) change if half the bonds were converted July 1, 2017?