Question

In: Accounting

In 2019, Pharoah Enterprises issued, at par, 60 $1,000, 8% bonds, each convertible into 100 shares...

In 2019, Pharoah Enterprises issued, at par, 60 $1,000, 8% bonds, each convertible into 100 shares of common stock. Pharoah had revenues of $18,800 and expenses other than interest and taxes of $8,000 for 2020. (Assume that the tax rate is 20%.) Throughout 2020, 1,800 shares of common stock were outstanding; none of the bonds was converted or redeemed.

(a) Compute diluted earnings per share for 2020. (Round answer to 2 decimal places, e.g. $2.55.)

Earnings per share

$


(b) Assume the same facts as those assumed for part (a), except that the 60 bonds were issued on September 1, 2020 (rather than in 2019), and none have been converted or redeemed. Compute diluted earnings per share for 2020. (Round answer to 2 decimal places, e.g. $2.55.)

Earnings per share

$


(c) Assume the same facts as assumed for part (a), except that 20 of the 60 bonds were actually converted on July 1, 2020. Compute diluted earnings per share for 2020. (Round answer to 2 decimal places, e.g. $2.55.)

Earnings per share

$

Solutions

Expert Solution

Answer a)

Answer b)

Answer c)

Calculation Particulars Revenue Less : Other Expenses Less : Bond Interest Income Before Taxes Less : Taxes Net Income (60-$1000*8%) Amount 18,800 -8000 -4800 6,000 -1200 4,800 ($6,000*20%) 8,640 Diluted Earning (Net Income + (1-Tax Rate)*(Bond Interest) (4,800 + (1-20%)*(4,800) Weighted Shares Common Stock Outstanding + Converted Shares) (1800 Shares +6,000) Diluted Earning Per share ( Diluted Earning/Weighted Shares $8,640/7,800 Shares 7,800 1.11

Calculation Particulars Revenue Less : Other Expenses Less : Bond Interest Income Before Taxes Less : Taxes Net Income (60-$1000*8%*4/12) Amount 18,800 -8000 - 16000 9,200 -1840 7,360 ($9,200*20%) 8,640 Diluted Earning (Net Income + (1-Tax Rate)*(Bond Interest) (7,360+ (1-20%)*(1,600) Weighted Shares (Common Stock Outstanding + Converted Shares) (1800 Shares + 6,000*4/12) Diluted Earning Per share ( Diluted Earning/Weighted Shares $8,640/3,800 Shares 3,800 2.27

We were unable to transcribe this image

Calculation Particulars Revenue Less : Other Expenses Less : Bond Interest Income Before Taxes Less : Taxes Net Income (60-$1000*8%*4/12) Amount 18,800 -8000 - 16000 9,200 -1840 7,360 ($9,200*20%) 8,640 Diluted Earning (Net Income + (1-Tax Rate)*(Bond Interest) (7,360+ (1-20%)*(1,600) Weighted Shares (Common Stock Outstanding + Converted Shares) (1800 Shares + 6,000*4/12) Diluted Earning Per share ( Diluted Earning/Weighted Shares $8,640/3,800 Shares 3,800 2.27

Calculation Particulars Revenue Less: Other Expenses Less : Bond Interest Income Before Taxes Less : Taxes Net Income (60-$1000*8%*1/2) +(40*$1000*8%*1/2) Amount 18,800 -8000 -4000 6,800 - 1360 5,440 ($6,800*20%) 8,640 Diluted Earning (Net Income + (1-Tax Rate)*(Bond Interest) (5,440 + (1-20%)*(4000) Weighted Shares (Common Stock Outstanding + Converted Shares) (1800 )+(2000*1/2Year ) + 4000 +(2000*1/2) Diluted Earning Per share ( Diluted Earning/Weighted Shares $8,000/7,800 Shares 7,800 1.11

ekkarill92 answered 1 year ago
Next > < Previous

Related Solutions

In 2019, Marigold Enterprises issued, at par, 60 $1,000, 8% bonds, each convertible into 100 shares...
In 2019, Marigold Enterprises issued, at par, 60 $1,000, 8% bonds, each convertible into 100 shares of common stock. Marigold had revenues of $16,000 and expenses other than interest and taxes of $6,700 for 2020. (Assume that the tax rate is 20%.) Throughout 2020, 2,400 shares of common stock were outstanding; none of the bonds was converted or redeemed. (a) Compute diluted earnings per share for 2020. (Round answer to 2 decimal places, e.g. $2.55.) Earnings per share $ (b)...
In 2019, Marigold Enterprises issued, at par, 60 $1,000, 8% bonds, each convertible into 100 shares...
In 2019, Marigold Enterprises issued, at par, 60 $1,000, 8% bonds, each convertible into 100 shares of common stock. Marigold had revenues of $16,000 and expenses other than interest and taxes of $6,700 for 2020. (Assume that the tax rate is 20%.) Throughout 2020, 2,400 shares of common stock were outstanding; none of the bonds was converted or redeemed. (a) Compute diluted earnings per share for 2020. (Round answer to 2 decimal places, e.g. $2.55.) Earnings per share $ (b)...
In 2016, Pronghorn Enterprises issued, at par, 60 $1,000, 8% bonds, each convertible into 100 shares...
In 2016, Pronghorn Enterprises issued, at par, 60 $1,000, 8% bonds, each convertible into 100 shares of common stock. Pronghorn had revenues of $18,200 and expenses other than interest and taxes of $8,400 for 2017. (Assume that the tax rate is 40%.) Throughout 2017, 2,000 shares of common stock were outstanding; none of the bonds was converted or redeemed. (a) Compute diluted earnings per share for 2017. (Round answer to 2 decimal places, e.g. $2.55.) Earnings per share $ (b)...
On January 2, 2019, Gino Co. issued at par $200,000 of 9% convertible bonds. Each $1,000...
On January 2, 2019, Gino Co. issued at par $200,000 of 9% convertible bonds. Each $1,000 bond is convertible into 20 shares. No bonds were converted during 2019. Gino had 50,000 shares of common stock outstanding during 2019. Gino's 2019 net income was $150,000 and the income tax rate was 25%. Compute Gino's EPS and diluted earnings per share for 2019 (rounded to the nearest penny). Show all computations
Net income for the year $1,210,000 7% convertible bonds issued at par ($1,000 per bond); each...
Net income for the year $1,210,000 7% convertible bonds issued at par ($1,000 per bond); each bond is convertible into     30 shares of common stock 2,000,000 6% convertible, cumulative preferred stock, $100 par value; each share is convertible      into 3 shares of common stock 4,080,000 Common stock, $10 par value 6,130,000 Tax rate for 2021 20% Average market price of common stock $25 per share There were no changes during 2021 in the number of common shares, preferred shares,...
Rottweiler Corporation issued 100, $1,000 par value bonds on February 24, 2019. The original bonds' maturity...
Rottweiler Corporation issued 100, $1,000 par value bonds on February 24, 2019. The original bonds' maturity was 20 years, and they have a six percent coupon. Rottweiler used the money to purchase 150 Really Adorable Puppies. The firm hopes to double production of Really Adorable Puppies in the next five to ten years. The company makes all payments on a semiannual basis. 1. ​What is the value of the bond on February 24, 2020, if the interest rate on comparable...
Rottweiler Corporation issued 100, $1,000 par value bonds on February 24, 2019. The original bonds' maturity...
Rottweiler Corporation issued 100, $1,000 par value bonds on February 24, 2019. The original bonds' maturity was 20 years, and they have a six percent coupon. Rottweiler used the money to purchase 150 Really Adorable Puppies. The firm hopes to double production of Really Adorable Puppies in the next five to ten years. The company makes all payments on a semiannual basis. 1. What is the value of the bond on February 24, 2020, if the interest rate on comparable...
Andrus Inc. issued convertible bonds at their $1,000 par value 5 years ago The bonds currently...
Andrus Inc. issued convertible bonds at their $1,000 par value 5 years ago The bonds currently sell for $950. At any time prior to maturity on August 1, 2031, a debenture holder can exchange a bond for 25 shares of common stock. The current stock price is $30. What is the conversion price,? $33 $32 $38 $40 None of the above
A company issued convertible bonds at $1,000 par value. Bondholders can exchange the bond for 25...
A company issued convertible bonds at $1,000 par value. Bondholders can exchange the bond for 25 shares of common stock at any time prior to maturity. What is the conversion price?
Western World Inc. issues $30,000,000 of convertible bonds with each $1,000 bond convertible into 15 shares...
Western World Inc. issues $30,000,000 of convertible bonds with each $1,000 bond convertible into 15 shares of the company’s $1 par common stock. The bonds are issued at 102 on January 1, 2019 and pay interest in Jan and July and mature on January 1, 2024. On July 1, 2020, 30% of the bonds are converted when the stock price is $80 per share and 30% of the bond premium has been amortized. Record the following transactions: a. Bond as...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT