EPS with convertible debt

During 20X6, ZZZ Corp. reported net income of $115,600 and had 200,000 shares of common stock outstanding for the entire year. ZZZ also had 1,000 shares of 10% $100 par, preferred stock outstanding during 20X6. During 20X5, ZZZ issued 600, $1,000 par, 7% bonds for $600,000 (issued at par). Each of these bonds is comvertible to 100 shares of common stock. The tax rate is 40%.

Compute the 20X6 basic and diluted EPS.

Question?) If ZZZ had issued the 600, $1,000 par, 7% bonds for $600,000 in 20X6 instead of 20X5, would you have needed to add the $600,000 to the numerator (net income available to common shareholders)?

Many thanks :slight_smile:


Issuing debt is not income.

Thanks S2000, I had a ‘blonde’ moment there!

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