Question

MacDonald Corp. had the following securities outstanding at its year-end 31 December 20X7: Long-term debt: Notes payable, 14% $4,500,000 8% convertible debentures, par value $2,500,000, net of discount 2,410,000 9.5% convertible debentures, par value $2,500,000, net of discount 2,452,000 Equity: Preferred shares, $5 dividend, payable as $1.25 per quarter, no-par, cumulative convertible shares; authorized, 100,000 shares; issued, 30,000 shares 4,700,000 Common shares, no-par; authorized, 5,000,000 shares; issued, 600,000 shares 2,000,000 Common share conversion rights 189,000

Additional information: a. 20X7 net earnings were $790,000. There were no discontinued operations.

b. Interest expense was $216,000 on the 8% debentures, and $250,000 on the 9.5% debentures.

c. Options to purchase 200,000 common shares at $11 per share beginning in 20X5 were outstanding throughout the year.

d. Additional options were issued on 1 May 20X7 to purchase 50,000 common shares at $27 per share in 20X9. The price per share becomes $27 in 20X0 and $25 in 20X1. These options expire at the end of 20X1.

e. The preferred shares are convertible into common shares at a rate of 9-for-1. They were issued on 1 October 20X7.

f. The 8% convertible debentures are convertible at the rate of seven shares for each $100 bond. The 9.5% convertible debentures are convertible at the rate of six shares for each $100 bond.

g. The tax rate is 30%; common shares traded for an average of $40 during the year. h. No common shares were issued or retired during the year.

Required: Calculate all EPS disclosures. Please show all calculations

Answer 1