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Question
The following information has been provided to you by the Smith Corporation for the year ending December 31, 2011:
The numerator used in the calculation of basic earnings per share was $797,000.
Cash dividends were paid to the common shareholders.
8% convertible bonds with a par value of $1,000,000 were issued on July 1, 2011.
The corporation's marginal income tax rate is 40%.
6% convertible preferred stock with a par value of $800,000 were outstanding during the entire year.
Assuming that both the bonds and preferred stock are dilutive, what is the numerator that should be used in the calculation of diluted earnings per share?
A. $893,000
B. $869,000
C. $773,000
D. $821,000
Answer
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