At the beginning of the fiscal year, June 1, Fox Corporation had 80,000 shares of common stock outstanding. Also outstanding was $200,000 of 8% convertible bonds that had been issued at $1,000 par. The bonds were convertible into 20,000 shares of common stock; however, no bonds were converted during the year. Fox's tax rate is 34% and net income for the year was $107,000. Diluted earnings per share of Fox common stock for the fiscal year ended May 31 was ___.

Question

Abraham Potter

Business

1 April, 12:46

At the beginning of the fiscal year, June 1, Fox Corporation had 80,000 shares of common stock outstanding. Also outstanding was $200,000 of 8% convertible bonds that had been issued at $1,000 par. The bonds were convertible into 20,000 shares of common stock; however, no bonds were converted during the year. Fox's tax rate is 34% and net income for the year was $107,000. Diluted earnings per share of Fox common stock for the fiscal year ended May 31 was ___.

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Mona · Answer 1

The Diluted earnings per share of Fox common stock for the fiscal year ended May 31 was $1.1756

Explanation:

The bonds were not converted during the fiscal year. The Diluted earning per share will be claculated as follows:

Diluted earning per share

= [net income available to shareholders + bond interest (1 - tax rate) ] / Weighted average number of shares outstanding

= [$107000 + $200000*8% * (1 - 34%) ] / (80000 + 20000)

= [$107000 + 16000 * (0.66) ] / (100000)

= [117560] / (100000)

= $1.1756

Therefore, The Diluted earnings per share of Fox common stock for the fiscal year ended May 31 was $1.1756