REFERENCE: Ref.06_02 Stoop Co.owned 80% of the Common Stock of Knight Co.Knight

question 115

Multiple Choice

REFERENCE: Ref.06_02
Stoop Co.owned 80% of the common stock of Knight Co.Knight had 50,000 shares of $5 par value common stock and 2,000 shares of preferred stock outstanding.Each preferred share received an annual per share dividend of $10 and is convertible into four shares of common stock.Stoop did not own any of Knight's preferred stock.Knight also had 600 bonds outstanding,each of which is convertible into ten shares of common stock.Knight's annual after-tax interest expense for the bonds was $22,000.Stoop did not own any of Knight's bonds.Knight reported income of $300,000 for 2009.
-Knight's diluted earnings per share (rounded) is calculated to be

• A)$5.62.
• B)$3.26.
• C)$3.11.
• D)$5.03.
• E)$4.28.

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