Question

In: Accounting

The Carla Corporation issued 10-year, $5,060,000 par, 7% callable convertible subordinated debentures on January 2, 2020....

The Carla Corporation issued 10-year, $5,060,000 par, 7% callable convertible subordinated debentures on January 2, 2020. The bonds have a par value of $1,000, with interest payable annually. The current conversion ratio is 14:1, and in 2 years it will increase to 18:1. At the date of issue, the bonds were sold at 99. Bond discount is amortized on a straight-line basis. Carla’s effective tax was 20%. Net income in 2020 was $11,200,000, and the company had 1,815,000 shares outstanding during the entire year. Compute both basic and diluted earnings per share.

Solutions

Expert Solution

Thank You!

I hope it was helpful!

Please give a thumbs up!


Related Solutions

The Swifty Corporation issued 10-year, $4,080,000 par, 7% callable convertible subordinated debentures on January 2, 2020....
The Swifty Corporation issued 10-year, $4,080,000 par, 7% callable convertible subordinated debentures on January 2, 2020. The bonds have a par value of $1,000, with interest payable annually. The current conversion ratio is 13:1, and in 2 years it will increase to 20:1. At the date of issue, the bonds were sold at 98. Bond discount is amortized on a straight-line basis. Swifty’s effective tax was 20%. Net income in 2020 was $10,950,000, and the company had 1,830,000 shares outstanding...
The Novak Corporation issued 10-year, $5,980,000 par, 6% callable convertible subordinated debentures on January 2, 2017....
The Novak Corporation issued 10-year, $5,980,000 par, 6% callable convertible subordinated debentures on January 2, 2017. The bonds have a par value of $1,000, with interest payable annually. The current conversion ratio is 15:1, and in 2 years it will increase to 17:1. At the date of issue, the bonds were sold at 96. Bond discount is amortized on a straight-line basis. Novak’s effective tax was 35%. Net income in 2017 was $7,700,000, and the company had 1,845,000 shares outstanding...
On January 1, 2017, Olson Corporation issued $6 million of 10-year, 7%, convertible debentures at 104....
On January 1, 2017, Olson Corporation issued $6 million of 10-year, 7%, convertible debentures at 104. Investment bankers believe that the debenture would have sold at 102 without the conversion privilege. Interest is to be paid semi-annually on June 30 and December 31. Each $1,000 debenture can be converted into five common shares of Olson after December 31, 2018. On January 1, 2016, $400,000 of debentures is converted into common shares, and on March 31, 2019, an additional $400,000 of...
On January 1, 2017, Waterway Corporation issued $3,680,000 of 10-year, 8% convertible debentures at 102. Interest...
On January 1, 2017, Waterway Corporation issued $3,680,000 of 10-year, 8% convertible debentures at 102. Interest is to be paid semiannually on June 30 and December 31. Each $1,000 debenture can be converted into 8 shares of Waterway Corporation $100 par value common stock after December 31, 2018. On January 1, 2019, $368,000 of debentures are converted into common stock, which is then selling at $110. An additional $368,000 of debentures are converted on March 31, 2019. The market price...
Exercise 16-6 On January 1, 2017, Stellar Corporation issued $4,060,000 of 10-year, 9% convertible debentures at...
Exercise 16-6 On January 1, 2017, Stellar Corporation issued $4,060,000 of 10-year, 9% convertible debentures at 104. Interest is to be paid semiannually on June 30 and December 31. Each $1,000 debenture can be converted into 8 shares of Stellar Corporation $101 par value common stock after December 31, 2018. On January 1, 2019, $406,000 of debentures are converted into common stock, which is then selling at $111. An additional $406,000 of debentures are converted on March 31, 2019. The...
Exercise 16-6 On January 1, 2017, Riverbed Corporation issued $4,140,000 of 10-year, 8% convertible debentures at...
Exercise 16-6 On January 1, 2017, Riverbed Corporation issued $4,140,000 of 10-year, 8% convertible debentures at 104. Interest is to be paid semiannually on June 30 and December 31. Each $1,000 debenture can be converted into 8 shares of Riverbed Corporation $100 par value common stock after December 31, 2018. On January 1, 2019, $414,000 of debentures are converted into common stock, which is then selling at $111. An additional $414,000 of debentures are converted on March 31, 2019. The...
Dickinson Limited issued 10-year, 7% debentures with a face value of $2 million on January 1,...
Dickinson Limited issued 10-year, 7% debentures with a face value of $2 million on January 1, 2010. The proceeds received were $1.7 million. The discount was amortized on the straight-line basis over the 10-year term. The terms of the debenture stated that the debentures could be redeemed in full at any point before the maturity date, at a price of 105 of the principal. There wan no requirement for a sinking fund. On January 1, 2017, Dickinson inued a mortgage...
Dickinson Limited issued 10-year, 7% debentures with a face value of $2 million on January 1,...
Dickinson Limited issued 10-year, 7% debentures with a face value of $2 million on January 1, 2010. The proceeds received were $1.7 million. The discount was amortized on the straight-line basis over the 10-year term. The terms of the debenture stated that the debentures could be redeemed in full at any point before the maturity date, at a price of 105 of the principal. There was no requirement for a sinking fund. On January 1, 2017, Dickinson issued a mortgage...
On January 1, 2020, Carla Company issued 10-year, $1,980,000 face value, 6% bonds, at par. Each...
On January 1, 2020, Carla Company issued 10-year, $1,980,000 face value, 6% bonds, at par. Each $1,000 bond is convertible into 15 shares of Carla common stock. Carla’s net income in 2020 was $479,400, and its tax rate was 20%. The company had 102,000 shares of common stock outstanding throughout 2020. None of the bonds were converted in 2020. (a) Compute diluted earnings per share for 2020. (Round answer to 2 decimal places, e.g. $2.55.) Diluted earnings per share $enter...
The Rockstar Corporation issued 10-year $900,000 par 6% convertible bonds on January 1, 2018 at 98....
The Rockstar Corporation issued 10-year $900,000 par 6% convertible bonds on January 1, 2018 at 98. The bonds have a par value of $1,000 with interest payable annually. Each bond is convertible into 10 shares of common stock; in two years this ratio will increase, meaning that each bond will be convertible into 30 shares of common stock. Assume Rockstar uses straight-line amortization for its bonds and that its effective tax rate is 35%. Net income in 2018 is $2,600,000...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT