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:

Balance Sheet Components

The major sections of a balance sheet, typically including assets, liabilities, and shareholders' equity.

Average Operating Assets

The average value of assets utilized in the regular operations of a business to generate earnings, calculated over a certain period.

Minimum Required Rate Of Return

The lowest acceptable return on an investment, determined by the investor’s preferences, risks, and opportunity costs.

Net Operating Income

A company's total earnings from its operations, exclusive of taxation and interest.