During 2018, Pina Inc., a furniture store, issued two different series of bonds, details of which...

During 2018, Pina Inc., a furniture store, issued two different series of bonds, details of which follow:

First issue: 670 $100, 10% bonds, at par, each convertible into 6 common shares.

Second issue: 390 $100, 7% bonds, at par, each convertible into 3 common shares.

For the year ended December 31, 2020, the company had net income of $53,850. Throughout 2020, 2,500 common shares were outstanding; none of the bonds were converted or redeemed. The company’s tax rate was 19%. (For simplicity, ignore the requirement to record the debt and equity portions of the convertible bond separately).

1. Calculate basic earnings per share for the year ended December 31, 2020.

2. Calculate diluted earnings per share for the year ended December 31, 2020.

Expert Solution

1.)	Earnings for Basic Earnings per share	$ 53,850
	( Equal to Net Income )

	Shares for Basic Earnings per share	2,500

	Basic earnings per share for the year ended December 31, 2020.	$ 21.54	=53850/2500



2.)	Net Income	53,850
	Add: Interest net of tax of 10% Bonds	5,427	=67010010%*(1-19%)
	Add: Interest net of tax of 7% Bonds	2,211	=3901007%*(1-19%)
	Earnings for Diluted Earnings per share	$ 61,488

	Outstanding Common Shares	2,500
	Add: 10% bond convertible into Common Shares	4,020	=670*6
	Add: 7% bond convertible into Common Shares	1,170	=390*3
	Shares for Diluted Earnings per share	7,690


	Diluted earnings per share for the year ended December 31, 2020	$ 8.00	=61488/7690

ekkarill92 answered 4 months ago

Pina Colada Corp. has issued three different bonds during 2022. Interest is payable annually on each...

Pina Colada Corp. has issued three different bonds during 2022. Interest is payable annually on each of these bonds. 1. On January 1, 2022, 1,000, 8%, 5-year, $1,000 bonds dated January 1, 2022, were issued at face value. 2. On July 1, $868,000, 9%, 5-year bonds dated July 1, 2022, were issued at 102. 3. On September 1, $234,000, 7%, 5-year bonds dated September 1, 2022, were issued at 99. Prepare the journal entry to record each bond transaction at...

Consider Retail Store database which store the details of different items available in the store and...

Consider Retail Store database which store the details of different items available in the store and the sales of these items to different customers: Schema: Item(ItemNo, ItemName, Category, UnitPrice) Sales(SalesNo, ITemNo, SalesDate, CustomerNo, Qty) Customer(CustomerNo, CustomerName, City, Income, MobileNo) Write the following queries in Relational Algebra: a) List the No. and Name of items in ‘ABC’ category. b) Count the No. of categories from which the items were bought by the customer ‘Mohan Kumar’ c) List the customers who has...

Obsidian Mining, Inc. issued a series of 5.2%, $200,000 bonds on April 1, 2020. The bonds...

Obsidian Mining, Inc. issued a series of 5.2%, $200,000 bonds on April 1, 2020. The bonds will pay interest semi-annually on September 30 and March 31 and mature in 10 years. At the time of issuance, the market rate of interest was 4.8%. Instructions Record the journal entry for the issuance of the bonds on April 1, 2020. Record the journal entry for the first interest payment on September 30, 2020. Record the year-end accrual for interest on December 31,...

Auerbach Inc. issued 5% bonds on October 1, 2018. The bonds have a maturity date of...

Auerbach Inc. issued 5% bonds on October 1, 2018. The bonds have a maturity date of September 30, 2028 and a face value of $2,000,000. The bonds pay interest each March 31 and September 30, starting on 3/31/19 and finishing at maturity. The effective interest rate established by the market is 6% annually at the date of issue. How much did Auerbach receive from the bond issue on 10/1/2018?

On February 1, 2018, Wolf Inc. issued 10% bonds dated February 1, 2018, with a face...

On February 1, 2018, Wolf Inc. issued 10% bonds dated February 1, 2018, with a face amount of $200,000. The bonds sold for $239,588 and mature in 20 years. The effective interest rate for these bonds was 8%. Interest is paid semiannually on July 31 and January 31. Wolf's fiscal year is the calendar year. Wolf uses the effective interest method of amortization. Required: 1. Prepare the journal entry to record the bond issuance on February 1, 2018. 2. Prepare...

On April 1, 2018, Western Communications, Inc., issued 12% bonds, dated March 1, 2018, with face...

On April 1, 2018, Western Communications, Inc., issued 12% bonds, dated March 1, 2018, with face amount of $32 million. The bonds sold for $31.3 million and mature on February 28, 2021. Interest is paid semiannually on August 31 and February 28. Stillworth Corporation acquired $32,000 of the bonds as a long-term investment. The fiscal years of both firms end December 31, and both firms use the straight-line method. Required: 1. Prepare the journal entries to record (a) issuance of...

Long-Term Bonds Payable Review Problem On January 1, 2018, Oxford, Inc. issued $400,000 of 6% bonds....

Long-Term Bonds Payable Review Problem On January 1, 2018, Oxford, Inc. issued $400,000 of 6% bonds. The bonds mature in four years. The annual market yield for bonds of similar risk and maturity is 8%. Oxford Inc. has a 12/31 fiscal year-end. 1. Prepare the journal entry that Oxford would make for the issuance of the bonds. 2. Prepare the journal entry required by Oxford on December 31, 2018 to record interest and amortize the bond. 3. Prepare the journal...

On January 1, 2018, Instaform, Inc., issued 12% bonds with a face amount of $75 million,...

On January 1, 2018, Instaform, Inc., issued 12% bonds with a face amount of $75 million, dated January 1. The bonds mature in 2037 (20 years). The market yield for bonds of similar risk and maturity is 14%. Interest is paid semiannually. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1-a. Determine the price of the bonds at January 1, 2018....

On January 1, 2018, Instaform, Inc., issued 10% bonds with a face amount of $49 million,...

On January 1, 2018, Instaform, Inc., issued 10% bonds with a face amount of $49 million, dated January 1. The bonds mature in 2037 (20 years). The market yield for bonds of similar risk and maturity is 12%. Interest is paid semiannually. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1-a. Determine the price of the bonds at January 1, 2018....

On January 1, 2018, Instaform, Inc., issued 12% bonds with a face amount of $55 million,...

On January 1, 2018, Instaform, Inc., issued 12% bonds with a face amount of $55 million, dated January 1. The bonds mature in 2037 (20 years). The market yield for bonds of similar risk and maturity is 14%. Interest is paid semiannually. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1-a. Determine the price of the bonds at January 1, 2018....

Question