Question

In: Accounting

The information below pertains to Swifty Company for 2018. Net income for the year $1,250,000 7%...

The information below pertains to Swifty Company for 2018. Net income for the year $1,250,000 7% convertible bonds issued at par ($1,000 per bond); each bond is convertible into 30 shares of common stock 2,000,000 6% convertible, cumulative preferred stock, $100 par value; each share is convertible into 3 shares of common stock 3,840,000 Common stock, $10 par value 6,270,000 Tax rate for 2018 40% Average market price of common stock $25 per share There were no changes during 2018 in the number of common shares, preferred shares, or convertible bonds outstanding. There is no treasury stock. The company also has common stock options (granted in a prior year) to purchase 81,600 shares of common stock at $20 per share. (a) Compute basic earnings per share for 2018. (Round answer to 2 decimal places, e.g. $2.55.) Basic earnings per share $ (b) Compute diluted earnings per share for 2018. (Round answer to 2 decimal places, e.g. $2.55.)

Expert Solution

Solution :-

Given information,

Net income = $1,250,000

Common stock, $10 par value = $ 6,270,000 / $10

= $6,270,00

Common stock, $10 par value = $6,270,00

preffered dividend = $ 3,840,000 * 6%

= $2,30,400

preffered dividend = $2,30,400

30 shares of common stock at 7% = $2,000,000

Tax rate = 40%

Potentially dilutive common shares = $ 81,600

(a). Compute basic earnings per share for 2018. (Round answer to 2 decimal places, e.g. $2.55.) Basic earnings per share $:-

Basic earing per share = (net income - preffered dividends) / Common stock, $10 par value

= ( $1,250,000 - $2,30,400 ) / $6,27,000

= (1,019,600 ) / 6,27,000

= 1.6261

Basic earing per share = $1.62

(b). Compute diluted earnings per share for 2018. (Round answer to 2 decimal places, e.g. $2.55.):-

Diluted earnings per share for 2018 = [ ( Net income - preffered dividend) + 30 shares of common stock at 7% ( tax rate ) ] / (Common stock, $10 par value + Potentially dilutive common shares)

= [ (1,250,000 - $2,30,400 ) + 2,000,000 ( 1 - 40%) ] / (6,27,000 + 81,600)

= [1,019,600 + 2,000,000 (0.6)] / ( 7,08,600 )

= [ 1,019,600 + 1,200,000] / (7,08,600)

= 2,219,600 / 7,08,600

= $3.1323

Diluted earnings per share for 2018= $3.13

ekkarill92 answered 1 year ago

The information below pertains to Kingbird Company for 2018. Net income for the year $1,150,000 6%...

The information below pertains to Kingbird Company for 2018. Net income for the year $1,150,000 6% convertible bonds issued at par ($1,000 per bond); each bond is convertible into 30 shares of common stock 2,040,000 6% convertible, cumulative preferred stock, $100 par value; each share is convertible into 3 shares of common stock 4,130,000 Common stock, $10 par value 6,030,000 Tax rate for 2018 40% Average market price of common stock $25 per share There were no changes during 2018...

The information below pertains to Metlock Company for 2021. Net income for the year $1,180,000 7%...

The information below pertains to Metlock Company for 2021. Net income for the year $1,180,000 7% convertible bonds issued at par ($1,000 per bond); each bond is convertible into 30 shares of common stock 1,910,000 6% convertible, cumulative preferred stock, $100 par value; each share is convertible into 3 shares of common stock 3,820,000 Common stock, $10 par value 5,850,000 Tax rate for 2021 20% Average market price of common stock $25 per share There were no changes during...

The information below pertains to Monty Company for 2021. Net income for the year $1,210,000 7%...

The information below pertains to Monty Company for 2021. Net income for the year $1,210,000 7% convertible bonds issued at par ($1,000 per bond); each bond is convertible into 30 shares of common stock 1,970,000 6% convertible, cumulative preferred stock, $100 par value; each share is convertible into 3 shares of common stock 4,200,000 Common stock, $10 par value 5,820,000 Tax rate for 2021 20% Average market price of common stock $25 per share There were no changes during...

The information below pertains to Stellar Company for 2021. Net income for the year $1,240,000 7%...

The information below pertains to Stellar Company for 2021. Net income for the year $1,240,000 7% convertible bonds issued at par ($1,000 per bond); each bond is convertible into 30 shares of common stock 1,970,000 6% convertible, cumulative preferred stock, $100 par value; each share is convertible into 3 shares of common stock 3,970,000 Common stock, $10 par value 6,010,000 Tax rate for 2021 20% Average market price of common stock $25 per share There were no changes during...

The information below pertains to Larkspur Company for 2021. Net income for the year $1,210,000 7%...

The information below pertains to Larkspur Company for 2021. Net income for the year $1,210,000 7% convertible bonds issued at par ($1,000 per bond); each bond is convertible into 30 shares of common stock 2,010,000 6% convertible, cumulative preferred stock, $100 par value; each share is convertible into 3 shares of common stock 3,870,000 Common stock, $10 par value 5,910,000 Tax rate for 2021 20% Average market price of common stock $25 per share There were no changes during 2021...

Computation of Basic and Diluted EPS) The information below pertains to Barkley Company for 2018. Net...

Computation of Basic and Diluted EPS) The information below pertains to Barkley Company for 2018. Net income for the year 7% convertible bonds issued at par ($1,000 per bond); each bond is convertible into 30 shares of common stock 6% convertible, cumulative preferred stock, $100 par value; each share is convertible into 3 shares of common stock Common stock, $10 par value Tax rate for 2018 Average market price of common stock $1,200,000 2,000,000 4,000,000 6,000,000 40% $25 per share...

Below information pertains to Eller Equipment Company for the year 2018. (Hint: Some of the items...

Below information pertains to Eller Equipment Company for the year 2018. (Hint: Some of the items will not appear on either statement, and ending retained earnings must be calculated.) Salaries expense $109,000 Beginning retained earnings $ 48,100 Common stock 97,000 Warranties payable (short term) 5,200 Notes receivable (short term) 19,500 Gain on sale of equipment 13,000 Allowance for doubtful accounts 21,000 Operating expenses 52,000 Accumulated depreciation 53,000 Cash flow from investing activities 103,000 Notes payable (long term) 89,350 Prepaid rent...

. The following information pertains to Feyenoord, Inc.: Net income for the year 2019 equals $...

. The following information pertains to Feyenoord, Inc.: Net income for the year 2019 equals $ 360,000. Since the beginning of year, $200,000 of convertible bonds (issued at par) were outstanding. Each of the 200, $1,000 bonds can be converted into 50 shares of common stock for the next 10 years. None of these bonds were converted during the year. Since the beginning of the year, stock warrants were outstanding to buy 16,000 shares of common stock at $10 per...

The following information pertains to DEF Company, Inc. for the year 2018. Liabilities at the end...

The following information pertains to DEF Company, Inc. for the year 2018. Liabilities at the end of the year, December 31, 2018 = $1,200 Contributed capital at the end of the year, December 31, 2018 = $700 Beginning retained earnings, January 1, 2018 = $300 Revenue during 2018 = $7,500 Expenses during 2018 = $6,800 Distributions to owners during 2018 = $100 What is the amount of the company's total assets at December 31, 2018? a. $2,800 b. $2,700 c....

Swifty Corporation reported net income of $203000 for the year. During the year, accounts receivable increased...

Swifty Corporation reported net income of $203000 for the year. During the year, accounts receivable increased by $15000, accounts payable decreased by $6000 and depreciation expense of $32000 was recorded. Net cash provided by operating activities for the year is $214000. $192000. $179000. $203000.