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 40%. Henderson-Niles paid dividends of $3 per share on its preferred stock during 2018.

Required:
Compute basic and diluted earnings per share for the year ended December 31, 2018. (Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)

Solutions

Expert Solution

Calculation of EPS - Amount in Million
Basic EPS
net income-prefrred dividend/weighted average no of common share outstanding
preferred dividend = 75*3 = 225
Basic EPS = 960-225/100
Basic EPS = 7.35

Diluted EPS - with conversion of preferred stock & without conversion of bond
NET income-preferred dividend+preferred divided
weighted avg no of common share outstanding+no of share due to conversion of preffered share

Dilluted EPS
960-225+225
100+36
7.06 per share

Diluted EPS - with conversion of preferred stock & with conversion of bond
net income-preferred dividend+prefrred dividend+interest saving after tax
weighted avg no of common share outstanding+no of share due to conversion
of preferred shares+no of shares due of bond conversion

Interest of bonds = 2800*10% = 280

Interest saving after tax = 280*(1-0.40) = 168

Dilluted EPS = 960-225+225+168
100+36+23
Dilluted EPS = 7.06 per share

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

Problem 19-18 EPS; stock options; nonconvertible preferred; convertible bonds; shares sold [LO19-4, 19-5, 19-6, 19-7, 19-8,...

Problem 19-18 EPS; stock options; nonconvertible preferred; convertible bonds; shares sold [LO19-4, 19-5, 19-6, 19-7, 19-8, 19-9] At January 1, 2018, Canaday Corporation had outstanding the following securities: 720 million common shares 45 million 8% cumulative preferred shares, $50 par 4% convertible bonds, $4,500 million face amount, convertible into 90 million common shares The following additional information is available: On September 1, 2018, Canaday sold 81 million additional shares of common stock. Incentive stock options to purchase 40 million shares...

Problem 19-17 EPS; options; convertible preferred; additional shares [LO19-4, 19-5, 19-6, 19-7, 19-8, 19-9] On January...

Problem 19-17 EPS; options; convertible preferred; additional shares [LO19-4, 19-5, 19-6, 19-7, 19-8, 19-9] On January 1, 2018, Tonge Industries had outstanding 460,000 common shares ($1 par) that originally sold for $25 per share, and 5,000 shares of 10% cumulative preferred stock ($100 par), convertible into 50,000 common shares. On October 1, 2018, Tonge sold and issued an additional 12,000 shares of common stock at $35. At December 31, 2018, there were 21,000 incentive stock options outstanding, issued in 2017,...

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 19-12 EPS; nonconvertible preferred stock; treasury shares; shares sold; stock dividend; options [LO19-4, 19-5, 19-6,...

Problem 19-12 EPS; nonconvertible preferred stock; treasury shares; shares sold; stock dividend; options [LO19-4, 19-5, 19-6, 19-7, 19-8, 19-10] On December 31, 2017, Dow Steel Corporation had 600,000 shares of common stock and 300,000 shares of 8%, noncumulative, nonconvertible preferred stock issued and outstanding. Dow issued a 4% common stock dividend on May 15 and paid cash dividends of $400,000 and $75,000 to common and preferred shareholders, respectively, on December 15, 2018. On February 28, 2018, Dow sold 60,000 common...

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...

P 19–12 EPS; nonconvertible preferred stock; treasury shares; shares sold; stock dividend; options LO19–4 through LO19–8,...

P 19–12 EPS; nonconvertible preferred stock; treasury shares; shares sold; stock dividend; options LO19–4 through LO19–8, LO19–10 (Note: This is a variation of P19–12, modified to include stock options.) On December 31, 2015, Dow Steel Corporation had 600,000 shares of common stock and 300,000 shares of 8%, noncumulative, nonconvertible preferred stock issued and outstanding. Dow issued a 4% common stock dividend on May 15 and paid cash dividends of $400,000 and $75,000 to common and preferred shareholders, respectively, on December...

Problem 19-19 EPS; options; restricted stock; additional components for "proceeds" in treasury stock method [LO19-1, 19-2,...

Problem 19-19 EPS; options; restricted stock; additional components for "proceeds" in treasury stock method [LO19-1, 19-2, 19-4, 19-8, 19-11] Witter House is a calendar-year firm with 430 million common shares outstanding throughout 2018 and 2019. As part of its executive compensation plan, at January 1, 2017, the company had issued 60 million executive stock options permitting executives to buy 60 million shares of stock for $12 within the next eight years, but not prior to January 1, 2020. The fair...

Exercise 19-19 (Algo) EPS; stock dividend; nonconvertible preferred stock; treasury shares; shares sold; stock options; convertible...

Exercise 19-19 (Algo) 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, 2020, Berclair Inc. had 560 million shares of common stock and 3 million shares of 9%, $100 par value cumulative preferred stock issued and outstanding. On March 1, 2021, Berclair purchased 24 million shares of its common stock as treasury stock. Berclair issued a 5% common stock dividend on July 1, 2021. Four million treasury shares...

Exercise 19-19 (Algo) EPS; stock dividend; nonconvertible preferred stock; treasury shares; shares sold; stock options; convertible...

Exercise 19-19 (Algo) 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, 2020, Berclair Inc. had 340 million shares of common stock and 6 million shares of 9%, $100 par value cumulative preferred stock issued and outstanding. On March 1, 2021, Berclair purchased 24 million shares of its common stock as treasury stock. Berclair issued a 5% common stock dividend on July 1, 2021. Four million treasury shares...

Subjects