9 percent Convertible Bonds (issued at par)

$1,800,000

Common Stock, 180,000 shares issued and outstanding, $50 par

$9,000,000

(a)

Each $1,000 convertible bond can be converted into 80 shares of common stock.

(b)

On September 1, 2012, one-third of the convertible debt was converted into common stock.

(c)

Mendoza reported net income of $1,550,000 in 2012. The income tax rate was 30 percent.

(d)

No other stock transactions took place during 2012.

(1)

Compute basic earnings per share for 2012.

(2)

Compute diluted earnings per share for 2012.

 2.