During 2018, Angel Corporation had 900,000 shares of common stock and 50,000 shares of 6% preferred...

During 2018, Angel Corporation had 900,000 shares of common stock and 50,000 shares of 6% preferred stock outstanding. The preferred stock is not convertible. Angel declared and paid cash dividends of $300,000 and $150,000 to common and preferred shareholders, respectively, during 2018. On January 1, 2017, Angel issued $2,000,000 of convertible 5% bonds at face value. Each $1,000 bond is convertible into 10 common shares. Angels net income for the year ended December 31, 2018, was $6 million. The income tax rate is 20%. What is Angel's basic earnings per share for 2018, rounded to the nearest cent? What will Angel report as diluted earnings per share for 2018, rounded to the nearest cent?

Solutions

Expert Solution

Basic earnings per share: [Net income -preferred dividend ]/weighted average number of common shares

= [6,000,000 - 150,000. ]/900,000

= 5850000/900000

= $ 6.5 per share

number of converted bonds in to shares : 2000000*10/1000=20000 shares

Interest on debt : 2000000*.05 = 100000

After tax interest :100000(1-.20)= 80000

Diluted earning per share :[net income +increase in interest (after tax)-preferred dividend]/[weighted average commonshares+converted shares]

=[6000000+80000-150000]/[900000+20000]

= 5930000/920000

= $6.45 per share

ekkarill92 answered 11 months ago

Next > < Previous

Related Solutions

ABC Corporation has 14 million shares of common stock outstanding, 900,000 shares of 8 percent preferred...

ABC Corporation has 14 million shares of common stock outstanding, 900,000 shares of 8 percent preferred stock outstanding and 220,000 semiannual bonds outstanding with coupon rate of 12% and par value of $1,000 each. The common stock currently sells for $42 per share and has a beta of 1.20, the preferred stock currently sells for $80 per share, and the bonds have 17 years to maturity and sell for 119.92 percent of par. The expected return on the market portfolio...

Bluefield Corporation has 6 million shares of common stock outstanding, 600,000 shares of preferred stock that...

Bluefield Corporation has 6 million shares of common stock outstanding, 600,000 shares of preferred stock that pays an annual dividend of $8, and 200,000 bonds with a 10 percent coupon (semiannual interest) and 20 years to maturity. At present, the common stock is selling for $50 per share, the bonds are selling for $950.62 per $1,000 of face value, and the preferred stock is selling at $74 per share. The estimated required rate of return on the market is 13...

Pealand Company has 50,000 shares of common stock outstanding and 2,000 shares of preferred stock outstanding....

Pealand Company has 50,000 shares of common stock outstanding and 2,000 shares of preferred stock outstanding. The common stock is $1.00 par value. The preffered stock has a $100 par value, a 5% dividend rate, and is noncumulative. On October 31, 2015, the company declares dividends of $0.25 per share for common. Provide the journal entry for the declaration of dividends.

At the end of its 2017 fiscal year-end Hopkins Corporation had 50,000 shares of preferred stock...

At the end of its 2017 fiscal year-end Hopkins Corporation had 50,000 shares of preferred stock outstanding. The preferred stock has a book value of $30 per share. In addition, Hopkins paid $75,000 in dividends to preferred shareholders in 2017. Hopkins also has $2,500,000 of interest bearing debt outstanding and its after-tax cost of debt is 6.4%. The market value of Hopkins Corporation’s common stock equity at year end is $6,240,000 and the company's cost of common equity is 9.4%....

On August 1, 2018 Adrian purchased 1,000 shares of Actovision Corporation common stock for $50,000. On...

On August 1, 2018 Adrian purchased 1,000 shares of Actovision Corporation common stock for $50,000. On November 1, 2018, Adrian sold her 1,000 shares of Actovision Corporation common stock for $40,000. On November 15, 2018, Adrian repurchased 800 shares of Actovision Corporation common stock for $28,000. What is Adrian’s realized and recognized gain or loss on the November 1, 2018 sale of her Actovision Corporation common stock. Please show your work and explain your calculations. What is her basis in...

On January 1, 2018, Coronado Corp. had 491,000 shares of common stock outstanding. During 2018, it...

On January 1, 2018, Coronado Corp. had 491,000 shares of common stock outstanding. During 2018, it had the following transactions that affected the Common Stock account. February 1 Issued 114,000 shares March 1 Issued a 10% stock dividend May 1 Acquired 103,000 shares of treasury stock June 1 Issued a 3-for-1 stock split October 1 Reissued 60,000 shares of treasury stock Determine the weighted-average number of shares outstanding as of December 31, 2018.

On January 1, 2018, Coronado Corp. had 491,000 shares of common stock outstanding. During 2018, it...

On January 1, 2018, Coronado Corp. had 491,000 shares of common stock outstanding. During 2018, it had the following transactions that affected the Common Stock account. February 1 Issued 114,000 shares March 1 Issued a 10% stock dividend May 1 Acquired 103,000 shares of treasury stock June 1 Issued a 3-for-1 stock split October 1 Reissued 60,000 shares of treasury stock a. Determine the weighted-average number of shares outstanding as of December 31, 2018. b. Assume that Coronado Corp. earned...

) On January 1, 2018, Swifty Corp. had 463,000 shares of common stock outstanding. During 2018,...

) On January 1, 2018, Swifty Corp. had 463,000 shares of common stock outstanding. During 2018, it had the following transactions that affected the Common Stock account. February 1 Issued 118,000 shares March 1 Issued a 10% stock dividend May 1 Acquired 103,000 shares of treasury stock June 1 Issued a 3-for-1 stock split October 1 Reissued 63,000 shares of treasury stock Collapse question part (a) Determine the weighted-average number of shares outstanding as of December 31, 2018. The weighted-average...

On January 1, 2018, Ivanhoe Corp. had 482,000 shares of common stock outstanding. During 2018, it...

On January 1, 2018, Ivanhoe Corp. had 482,000 shares of common stock outstanding. During 2018, it had the following transactions that affected the Common Stock account. February 1 Issued 126,000 shares March 1 Issued a 10% stock dividend May 1 Acquired 104,000 shares of treasury stock June 1 Issued a 3-for-1 stock split October 1 Reissued 61,000 shares of treasury stock Part 1 Determine the weighted-average number of shares outstanding as of December 31, 2018. The weighted-average number of shares...

On January 1, 2018, Oriole Corp. had 459,000 shares of common stock outstanding. During 2018, it...

On January 1, 2018, Oriole Corp. had 459,000 shares of common stock outstanding. During 2018, it had the following transactions that affected the Common Stock account. February 1 Issued 126,000 shares March 1 Issued a 10% stock dividend May 1 Acquired 101,000 shares of treasury stock June 1 Issued a 3-for-1 stock split October 1 Reissued 62,000 shares of treasury stock Determine the weighted-average number of shares outstanding as of December 31, 2018. The weighted-average number of shares outstanding Assume...

Subjects