Basic Earnings Per Share Vs Diluted Earnings Per Share (Dilutive Convertible Securities EPS)

Accounting for basic earings per share versus diluted earings per share, the dilutive security used in the example is a convertible bond, (A) Basic Earnings per share C/S (Bonds not converted C/S), (B) Diluted Earnings per share C/S (Bonds converted to C/S), first determine the weigthed average number of shares outstanding, basic earnings per share does not include the number common stock issued upon the conversion of bonds into C/S (assumed bonds are converted to C/S at issue date of bonds), the diluted earnings per share includes the number of common stock issued when the bonds are converted, basic EPS = (Net income after tax/weighted average shares outstanding), diluted EPS = (net income after tax + interest expense for bonds net of tax)/weighted average shares outstanding), example Two different companies merge on (6/1/X1) to form Corp-A with the following C/S stock issues: 1-To complete merger 400,000 shares issued (6/1/X1), 2-On (4/1/X2) issued an additional 300,000 shares, Dilutive security as a convertible bond:Corp-A also issued a Convertible Bond on (7/1/X2): $600,000 bonds at par $1,000, 8% Bonds each convertible into 40 shrs Common Stock = 24,000 shrs, detailed calculations by Allen Mursau