DWOULD BE ISSUED IN THE CONVERSION IS ADDED TO THE DENOMINATOR

would be issued in the conversion is added to the denominator. Kendall’s Diluted EPS was (($830,000 +

(1,000 * $1,000 * 0.06) * (1– 0.4)) / (200,000 + (20,000)) = $3.93). Note that since diluted EPS is less than

basic EPS, we know that the bonds are dilutive and should be considered in calculating diluted EPS.