Questions #2 Basic and diluted earnings per share

Bartov Corp. had the following information for calendar 2020

Net income $ 5,500,000

Weighted average common shares outstanding, 1,000,000 shares

$10, no-par, cumulative preferred shares, 20,000 outstanding,

convertible into 125,000 common shares

8% convertible bonds; convertible into 100,000 common shares $ 7,500,000

500,000 call options exercisable at $ 20 per share

The common and preferred shares and the convertible bonds were outstanding from the beginning of the year. The average market price of the common shares in 2020 was $ 25. The income tax rate for 2020 is 20%.

Instructions

a) Calculate basic EPS.

b) Computed the incremental EPS for each potentially dilutive security and rank them according to their dilutive effects.

c) Calculate diluted EPS.