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Convertible Preferred Stock, Convertible Bonds, and EPS Francis Company has 31,200 shares of common stock outstanding...

Convertible Preferred Stock, Convertible Bonds, and EPS Francis Company has 31,200 shares of common stock outstanding at the beginning of 2016. Francis issued 3,900 additional shares on May 1 and 2,600 additional shares on September 30. It also has two convertible securities outstanding at the end of 2016. These are: Convertible preferred stock: 3,250 shares of 9.0%, $50 par, preferred stock were issued on January 2, 2013, for $60 per share. Each share of preferred stock is convertible into 3 shares of common stock. Current dividends have been declared and paid. To date, no preferred stock has been converted. Convertible bonds: Bonds with a face value of $325000 and an interest rate of 5.0% were issued at par in 2015. Each $1000 bond is convertible into 25 shares of common stock. To date, no bonds have been converted. Francis earned net income of $79000 during 2016. The income tax rate is 30%. Required: 1. Compute the number of shares of common stock that Francis should use in calculating basic earnings per share for 2016. Weighted average shares outstanding: shares 2. Calculate basic earnings per share for 2016. If required, round your answer to two decimal places. Basic earnings per share: $ 3. Calculate diluted earnings per share for 2016 and the incremental EPS of the preferred stock and convertible bonds. If required, round your answers to two decimal places. Diluted earnings per share: $ Incremental earnings per share Bonds: $ Preferred: $ 4a. Assume the same facts as above except that net income included a loss from discontinued operations of $12000 net of income taxes. Compute basic EPS. You do not have to calculate diluted EPS for this case. If required, round your answer to two decimal places. Basic earning per share: $ 4b. Show how the basic EPS you calculated should be reported to shareholders. You do not have to calculate diluted EPS. Francis Company EPS Computations EPS Based on:

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Part 1
Time Shares Weighted Average
Jan 1 to May 1 4/12       31,200                            10,400
May 1 to Sep 30 5/12         3,900                              1,625
Sep 30 to Dec 31 3/12         2,600                                  650
Weighted Average shares outstanding                            12,675
Part 2
Basic Earning per Share
Net Income $   79,000
Less: Preferred Dividend $ -14,625
3,250 Shares*$50 Par*9%
$   64,375
Divided By: Weighted Avg Shares       12,675
Basic Earning per Share $       5.08
Part 3
Diluted Earning per share
Net Income $   79,000
Interest on Bond $325,000*5% $   16,250
Less: Tax on Bond Interest $16,250*30% $    -4,875 $   11,375
Income for Diluted EPS $   90,375
No of Shares including Potential shares:
Weighted Average shares outstanding       12,675
Add: Preferred 3250*3         9,750
Add: Bond-Convertible 325000/1000*25         8,125
No of Shared for Diluted EPS       30,550
Diluted EPS $90,375/30,550 $       2.96
Incremental EPS:
Bonds 11,375/8,125 $       1.40
Preferred Stock 14,625/9,750 $       1.50
Part 4
Basic EPS
Income from Continuing Operations $   91,000 $       6.03 (91000-14625)/12675
Loss from Discontinuing Operations $ -12,000 $      -0.95 12000/12675
Net Income $   79,000 $       5.08 (79000-14625)/12675

ekkarill92 answered 4 months ago
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