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In: Accounting

The following information was taken from the books and records of Wildhorse, Inc.: 1. Net Income...

The following information was taken from the books and records of Wildhorse, Inc.:
1. Net Income $360,000
2. Capital structure:
a. Convertible 6% bonds. Each of the 330, $1,000 bonds is convertible into 50 shares of common stock at the present date and for the next 10 years. 330,000
b. $10 par common stock, 180,000 shares issued and outstanding during the entire year. 1,800,000
c. Stock warrants outstanding to buy 15,840 shares of common stock at $20 per share.
3. Other information:
a. Bonds converted during the year None
b. Income tax rate 30%
c. Convertible debt was outstanding the entire year
d. Average market price per share of common stock during the year $32
e. Warrants were outstanding the entire year
f. Warrants exercised during the year None
Compute basic earnings per share. (Round answer to 2 decimal places, e.g. 52.75.)
Basic earnings per share $

????
Compute diluted earnings per share. (Round answers to 2 decimal places, e.g. 52.75.)
Security EPS
Common Stock $

????
Warrants $

????
Conversion Bonds $

????

Solutions

Expert Solution

Answer:

Calculation of earning per share of Wildhorse, Inc.

Earning Per Share = Earning available for equity shareholder/ No. of Outstanding share during the year

= $360,000 / 180,000

= $2 Per share.

Calculation of diluted earning per share of Wildhorse, Inc.

Diluted Earning per share = Earning available for equity shareholder* / No. of outstanding shares**

= $373,860 / 202440

= $1.85 Per share.

* Earning available for equity shareholder

Particulars Amount
Net Income $360,000
Add: Interest expenses on debenture ($330,000 x 6%) $19,800
Less: Tax Saving on interest expenses ($19800x 30%) ($5,940)
Earning Available for equity shareholder $373,860

** Number of outstanding shares during the year

Particulars No. of shares
Outstanding common stock during the year 180,000
Add: Potential convertible debenture into common stock (330 x 50) 16,500
Add: Potential stock warrant 15840 x (32-20)/32 5,940
Total Number of the outstanding equity share 202,440

ekkarill92 answered 1 year ago
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