Question: Question 2 Earnings per share 11 marks Garlic Ltd. Provides information for 2017: Net income $560,000 Capital Structure Convertible 6% bonds. Each of the 300,

Question 2 Earnings per share 11 marks

Garlic Ltd. Provides information for 2017:

  1. Net income $560,000
  2. Capital Structure
  1. Convertible 6% bonds. Each of the 300,

$1,000 bonds is convertible into 50 common

shares for the next 10 years. $300,000

  1. Common shares, 200,000 shares issued

And outstanding during the entire year $2,000,000

  1. Stock options are outstanding to buy 16,000

Common shares at $20 per share.

  1. Other information

a. Bonds converted during 2017 None

b. Income tax rate 30%

c. Convertible debt was outstanding the entire year

d. Average Market price per common share during

2017. $32

e. Stock options were outstanding the entire year

f. Stock options exercised during 2017 None

Required:

  1. Calculate the basic earnings per share for 2017
  2. Calculate the diluted earnings per share for 2017.

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