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    Calculate basic and diluted earnings per share

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    Assume that the following data related to Fargo, Inc for the year 2008

    Net income (30% tax rate) $3,000,000
    Average common shares outstanding 2008 1,000,000 shares
    10% cumulative convertible preferred stock:
    Convertible into 80,000 shares of common $1,600,000
    8% convertible bonds: convertible into 75,000
    shares of common $2,500,000
    Stock options:
    Exercisable at the option price of $25 per share;
    average market price in 2008, $30 84,000 Shares

    Instructions; compute A) basic per share, and B) diluted earnings per share.

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    Solution Summary

    The solution calculates basic and diluted earnings per share for Fargo, Inc.