On December 31,2015,Merlin Company Had Outstanding 400,000 Shares of Common

On December 31,2015,Merlin Company had outstanding 400,000 shares of common stock and 40,000 shares of 8% cumulative preferred stock (par $10).On February 28,2016,Merlin issued an additional 36,000 shares of common stock.A 10% stock dividend was declared and distributed on July 1,2016.On September 1,2016,9,000 shares were retired.At year-end,there were fully vested incentive stock options outstanding for 30,000 shares of common stock (adjusted for the stock dividend).The exercise price was $18.The market price of the common stock averaged $20 during the year.Also outstanding were $1,000,000 face amount of 10% convertible bonds issued in 2013 and convertible into 50,000 common shares (adjusted for the stock dividend).Net income was $900,000.The tax rate for the year was 40%.
Required:
Compute basic and diluted EPS (rounded to 2 decimal places)for the year ended December 31,2016.

Correct Answer:

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Basic EPS = ($ in 00...

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