Question

For 2013, Behrend Corp. originally reported basic EPS of $2.00 and diluted EPS of $1.80. At the end of 2014, Behrend distributed a 2 for 1 stock split. In reporting the 2013, comparative amounts in the 2014 annual report, the basic and diluted EPS amounts will be respectively reported at:

$2.00/share, $1.80/share

$1.00/share, $.90/share

$1.00/share, $1.80/share

$2.00/share, $.90/share

Throughout 2014, Behrend Corporation had 900,000 shares of common stock and 50,000 shares of $6 nonconvertible preferred stock outstanding. Behrend declared and paid the annual cash dividend of $300,000 to preferred shareholders during 2014.
On January 1, 2014, Behrend issued $2,000,000 of convertible 5% bonds at face value. Each $1,000 bond is convertible into 20 common shares, but none were converted during 2014.
Behrend’s net income for the year ended December 31, 2014, was $3.9 million. The income tax rate is 40%, and Behrend reported no below-the-line items.

What is Behrend’s basic earnings per share for 2014, rounded to the nearest cent?

$4.33

$4.00

$3.00

None of these is correct.

Throughout 2014, Behrend Corporation had 900,000 shares of common stock and 50,000 shares of $6 nonconvertible preferred stock outstanding. Behrend declared and paid the annual cash dividend of $300,000 to preferred shareholders during 2014.

On January 1, 2014, Behrend issued $2,000,000 of convertible 5% bonds at face value. Each $1,000 bond is convertible into 20 common shares, but none were converted during 2014.
Behrend’s net income for the year ended December 31, 2014, was $3.9 million. The income tax rate is 40%, and Behrend reported no below-the-line items.

What will Behrend report as diluted earnings per for 2014, rounded to the nearest cent?

$4.00

$3.89

$3.94

$3.83