The following information is relevant to the computation of Nathan Co.'s earnings per share to be disclosed on Nathan’s income statement for the year ending December 31:

• Net income for 2004 is $2,400,000.
• Nathan’s corporate income tax rate is 30%
• On January 1, 2004, Nathan issued $8,000,000 face value 10 year convertible bonds with a stated rate of 7%. The bonds were issued to yield 9%, which resulted in a discount of $200,000. The discount is being amortized annually over the life of the bond. Each $10,000 bond is convertible to 140 shares of Nathan’s common stock.

Nathan has no preferred stock outstanding, and no other convertible securities. What amount should be used as the numerator in the fraction used to compute Nathan's diluted earnings per share assuming that the bonds are dilutive securities?

• A. $2,792,000
• B. $2,918,000
• C. $2,806,000
• D. $2,400,000

Answer rating: 100% (QA)

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