Question
In: Accounting
Computing Diluted EPS: Convertible Bonds and Convertible Preferred Stock Jones Corporation's capital structure follows. December 31...
Computing Diluted EPS: Convertible Bonds and Convertible Preferred Stock
Jones Corporation's capital structure follows.
| December 31 | 2020 | |
|---|---|---|
| Outstanding shares of stock | ||
| Common stock, outstanding shares | 242,000 | |
| Convertible preferred stock, outstanding shares | 22,000 | |
| 8% Convertible bonds | $2,200,000 |
During 2020, Jones declared and paid dividends of $3.00 per share on its preferred stock. The preferred shares are convertible in 44,000 shares of common stock. The 8% bonds are convertible into 66,000 shares of common stock. Net income for 2020 is $1,955,000. Assume that the income tax rate is 25%.
Required
a. Compute basic EPS for 2020.
b. Compute diluted EPS for 2020.
- Note: Round earnings per share amounts to two decimal places.
| Net Income Available to Common Stockholders |
Weighted Avg. Common Shares Outstanding |
Per Share |
|
|---|---|---|---|
| Basic EPS | Answer | Answer | Answer |
| Diluted EPS | Answer | Answer | Answer |
Solutions
Expert Solution
Answer:
a) Computation of EPS for 2020:
Basic EPS = (Earning available for equity shareholders / Weighted average common share outstanding)
= $1,889,000 / 242,000
= 7.81 Per share.
Note-1
Earning available for equity shareholders=( Net Income - Dividend on preferred stock)
= ($1,955,000 - $66,000)
= $1,889,000
Note-2 Assume Net Income provided above is after tax.
b) Computation of diluted EPS for 2020:
Basic EPS = (Earning available for equity shareholders / Weighted average common share outstanding)
= $2,087,000/ 352,000
= 593 Per-share.
Earning available for equity shareholders:
| Particulars | Amount |
| Net Income after dividend | $1889000 |
| Add: Interest on the debt (2,200,000x 8%) (1-25%) | $132,000 |
| Add: Preference Dividend | $66,000 |
| Total | $2,087,000 |
The weighted average common share outstanding
| Particulars | No. of shares |
| No. of common stock | 242,000 |
| No. of convertible preference shares | 44,000 |
| No. of the convertible debenture | 66,000 |
| Total | 352,000 |
,
ekkarill92 answered 1 year agoRelated Solutions
Convertible Preferred Stock, Convertible Bonds, and EPS Francis Company has 16,800 shares of common stock outstanding...
Convertible Preferred Stock, Convertible Bonds, and EPS
Francis Company has 16,800 shares of common stock outstanding at
the beginning of 2019. Francis issued 2,100 additional shares on
May 1 and 1,400 additional shares on September 30. It also has two
convertible securities outstanding at the end of 2019. These
are:
Convertible preferred stock: 1,750 shares of 8.0%, $50 par,
preferred stock were issued on January 2, 2016, for $55 per share.
Each share of preferred stock is convertible into 2...
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...
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...
Drew Corporation's capital structure consists of 50,000 shares of common stock. At December 31, 2019 an...
Drew Corporation's capital structure consists of 50,000 shares
of common stock. At December 31, 2019 an analysis of the accounts
and discussions with company officials revealed the following
information: Sales revenue 1,100,000 Cost of Goods Sold 701,000
Income from operations of discontinued product line 35,000 Loss on
disposal of discontinued production line 70,000 Selling expenses
128,000 Cash 60,000 Accounts receivable 90,000 Unrealized gain on
available for sale securities 12,000 Common stock 200,000
Accumulated depreciation-machinery 180,000 Dividend revenue 8,000
Inventory, December...
========Stock options and warrants affect the diluted EPS calculation by changing the ________. ======Before computing the...
========Stock options and warrants affect the diluted EPS
calculation by changing the ________.
======Before computing the gain or loss on the early
extinguishment of bonds payable, the company must amortize any
discount or premium up to the retirement date. true or false
====When bonds are issued at par, the market rate is equal to
the stated rate. true or false
======Bonds that do not pay cash interest are referred to as
zero-coupon bonds. true or false
=====______ preferred stock shares...
Delta Corporation's capital structure consists of 20,000 common shares at December 31. At December 31, 2020...
Delta Corporation's capital structure consists of 20,000 common
shares at December 31. At December 31, 2020 an analysis of the
accounts and discussions with company officials revealed the
following information:
Sales.................................................................................................
$1,300,000
Inventory, January 1,
2020..............................................................
150,000
Purchases.........................................................................................
728,000
Purchase
discounts...........................................................................
18,000
Inventory, December 31,
2020........................................................
130,000
Tornado loss (net after
$18,000 tax) ..............................................
42,000
Selling
expenses..............................................................................
148,000
Cash.................................................................................................
60,000
Accounts
receivable........................................................................
...
Exercise 19-19 EPS; stock dividend; nonconvertible preferred stock; treasury shares; shares sold; stock options; convertible bonds...
Exercise 19-19 EPS; stock dividend; nonconvertible preferred
stock; treasury shares; shares sold; stock options; convertible
bonds [LO19-5,19-6, 19-7, 19-8, 19-9] On December 31, 2017,
Berclair Inc. had 480 million shares of common stock and 5 million
shares of 9%, $100 par value cumulative preferred stock issued and
outstanding. On March 1, 2018, Berclair purchased 24 million shares
of its common stock as treasury stock. Berclair issued a 5% common
stock dividend on July 1, 2018. Four million treasury shares were...
Problem 19-13 (Algo) EPS; nonconvertible preferred stock; treasury shares; shares sold; stock dividend; options; convertible bonds;...
Problem 19-13 (Algo) EPS; nonconvertible preferred stock;
treasury shares; shares sold; stock dividend; options; convertible
bonds; contingently issuable shares [LO19-4, 19-5, 19-6, 19-7,
19-8, 19-9, 19-10, 19-11]
On December 31, 2020, Dow Steel Corporation had 770,000 shares
of common stock and 317,000 shares of 9%, noncumulative,
nonconvertible preferred stock issued and outstanding. Dow issued a
5% common stock dividend on May 15 and paid cash dividends of
$570,000 and $86,000 to common and preferred shareholders,
respectively, on December 15, 2021....
Problem 19-14 EPS; convertible preferred stock; convertible bonds; order of entry [LO19-7, 19-9, 19-10] Information from...
Problem 19-14 EPS; convertible preferred stock; convertible
bonds; order of entry [LO19-7, 19-9, 19-10]
Information from the financial statements of Henderson-Niles
Industries included the following at December 31, 2018:
Common shares outstanding throughout the year
100
million
Convertible preferred shares (convertible into 36 million
shares of common)
75
million
Convertible 10% bonds (convertible into 23.0 million shares of
common)
$
2,800
million
Henderson-Niles’s net income for the year ended December 31, 2018,
is $960 million. The income tax rate is...
When computing diluted earnings per share, convertible bonds are Select one: a. assumed converted only if...
When computing diluted earnings per share, convertible bonds
are
Select one:
a. assumed converted only if they are antidilutive.
b. ignored.
c. assumed converted whether they are dilutive or
antidilutive.
d. assumed converted only if they are dilutive.
Y Corporation is organized with authorized common stock of
10,000 shares without par value. If Y then issues 500 shares for
cash at $10 per share, it makes the following entry.
Select one:
a. Dr. Equipment 1,500, Cr. Common Stock 5,00 and...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Tidewater Company uses the product cost concept of applying the cost-plus approach to product pricing. The...
- Create 5 short-term plan of technology projects that you can perform outside of an I.T. department...
- Derek plans to retire on his 65th birthday. However, he plans to work part-time until he...
- Toady and Froggy were running a vegan cafe together. The business was having financial difficulties.Betelguese, who...
- 1. The following questions concern Jesse Gelsinger who suffered from partial OTC. a. In the...
- Pittman Company is a small but growing manufacturer of telecommunications equipment. The company has no sales...
- TzeMay was one of the first women engineering students at ABC University. She graduated in 1995...
ADVERTISEMENT