Basic and Diluted Earnings Per Share

question 20

Essay

Basic and diluted earnings per share
Barker Inc. reported net income (30% tax rate) of $ 1,600,000 for calendar 2020, and an average of 500,000 common shares outstanding during the year. Barker issued $ 2,000,000 par value, 10-year, 9% convertible bonds on January 1, 2018 at a $ 18,000 discount. The bonds are convertible into 60,000 common shares. Barker uses the straight-line method for amortizing the bond discount.
Instructions
Calculate basic and diluted earnings per share for 2020.

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Definitions:

Cost Driver

A factor that causes a change in the cost of an activity, such as machine-hours or labor hours, used in determining pricing and profitability.

Flexible Budgets

Budgets that adjust or flex with changes in the volume or level of activity.

Measure of Activity

An identifier used to gauge the level or intensity of activity within a certain process or system.

Planning Budget

A budget designed for a specific level of activity, often used as a tool for performance evaluation and cost management.