Question

In: Accounting

Exercise 16-24 Incorrect answer. Your answer is incorrect. Try again. The Martinez Corporation issued 10-year, $4,000,000...

Exercise 16-24 Incorrect answer. Your answer is incorrect. Try again. The Martinez Corporation issued 10-year, $4,000,000 par, 7% 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 13:1, and in 2 years it will increase to 17:1. At the date of issue, the bonds were sold at 98. Bond discount is amortized on a straight-line basis. Martinez’s effective tax was 35%. Net income in 2017 was $10,950,000, and the company had 1,980,000 shares outstanding during the entire year. (a) Compute both basic and diluted earnings per share. (Round answers to 2 decimal places, e.g. $2.55.) Basic earnings per share $Entry field with incorrect answer 3.14 Diluted earnings per share $Entry field with incorrect answer 2.91 Click if you would like to Show Work for this question:

Expert Solution

(a) Net income for year $10,950,000

Add: Adjustment for interest (net of tax) 187,200*

$11,137,200

*Maturity value $4,000,000

Stated rate X 7%

Cash interest 280,000

Discount amortization [(1.00 – .98) X $4,000,000 X 1/10] 8,000

Interest expense 288,000

1 – tax rate (35%) X .65

After-tax interest $ 187,200

$4,000,000/$1,000 = 4,000 debentures

Increase in diluted earnings per share denominator:

4,000

X 17

68,000

Earnings per share:

Basic EPS $10,950,000 ÷ 1,980,000 = $5.53

Diluted EPS $11,137,200 ÷ 2,048,000 = $5.44

Note: I have tried my best for correct solution and work , still you need any further help, please ask in comment and don’t forget to rate positively.

ekkarill92 answered 1 year ago

Exercise 9-10 Incorrect answer. Your answer is incorrect. Try again. During 2017, Oriole Furniture Company purchases...

Exercise 9-10 Incorrect answer. Your answer is incorrect. Try again. During 2017, Oriole Furniture Company purchases a carload of wicker chairs. The manufacturer sells the chairs to Oriole for a lump sum of $60,700 because it is discontinuing manufacturing operations and wishes to dispose of its entire stock. Three types of chairs are included in the carload. The three types and the estimated selling price for each are listed below. Type No. of Chairs Estimated Selling Price Each Lounge chairs...

Exercise 12-11 Your answer is incorrect. Try again. Drake Corporation is reviewing an investment proposal. The...

Exercise 12-11 Your answer is incorrect. Try again. Drake Corporation is reviewing an investment proposal. The initial cost is $104,600. Estimates of the book value of the investment at the end of each year, the net cash flows for each year, and the net income for each year are presented in the schedule below. All cash flows are assumed to take place at the end of the year. The salvage value of the investment at the end of each year...

Exercise 22-22 Incorrect answer. Your answer is incorrect. Try again. On January 1, 2017, Buffalo Co....

Exercise 22-22 Incorrect answer. Your answer is incorrect. Try again. On January 1, 2017, Buffalo Co. purchased 23,000 shares (a 10% interest) in Elton John Corp. for $1,510,000. At the time, the book value and the fair value of John’s net assets were $12,900,000. On July 1, 2018, Buffalo paid $2,760,000 for 46,000 additional shares of John common stock, which represented a 20% investment in John. The fair value of John’s identifiable assets net of liabilities was equal to their...

x Brief Exercise 19-8 Your answer is incorrect. Try again. NoFly Corporation sells three different models...

x Brief Exercise 19-8 Your answer is incorrect. Try again. NoFly Corporation sells three different models of a mosquito “zapper.” Model A12 sells for $58 and has variable costs of $41. Model B22 sells for $102 and has variable costs of $75. Model C124 sells for $413 and has variable costs of $316. The sales mix of the three models is A12, 58%; B22, 27%; and C124, 15%. If the company has fixed costs of $208,269, how many units of...

Exercise 9-07 Your answer is incorrect. Try again. Bonita Company follows the practice of pricing its...

Exercise 9-07 Your answer is incorrect. Try again. Bonita Company follows the practice of pricing its inventory at the lower-of-cost-or-market, on an individual-item basis. Item No. Quantity Cost per Unit Cost to Replace Estimated Selling Price Cost of Completion and Disposal Normal Profit 1320 1,700 $3.49 $3.27 $4.91 $0.38 $1.36 1333 1,400 2.94 2.51 3.82 0.55 0.55 1426 1,300 4.91 4.03 5.45 0.44 1.09 1437 1,500 3.92 3.38 3.49 0.27 0.98 1510 1,200 2.45 2.18 3.54 0.87 0.65 1522 1,000...

Your answer is incorrect. Try again. Lon Timur is an accounting major at a midwestern state...

Your answer is incorrect. Try again. Lon Timur is an accounting major at a midwestern state university located approximately 60 miles from a major city. Many of the students attending the university are from the metropolitan area and visit their homes regularly on the weekends. Lon, an entrepreneur at heart, realizes that few good commuting alternatives are available for students doing weekend travel. He believes that a weekend commuting service could be organized and run profitably from several suburban and...

Exercise 9-24 [Partially correct answer.] Your answer is partially correct. Try again. Culver Company began operations...

Exercise 9-24 [Partially correct answer.] Your answer is partially correct. Try again. Culver Company began operations on January 1, 2016, adopting the conventional retail inventory system. None of the company’s merchandise was marked down in 2016 and, because there was no beginning inventory, its ending inventory for 2016 of $37,300 would have been the same under either the conventional retail system or the LIFO retail system. On December 31, 2017, the store management considers adopting the LIFO retail system and...

Your answer is incorrect. Try again. Vaughn Company follows the practice of pricing its inventory at...

Your answer is incorrect. Try again. Vaughn Company follows the practice of pricing its inventory at LCNRV, on an individual-item basis. Item No. Quantity Cost per Unit Estimated Selling Price Cost to Complete and Sell 1320 1,900 $3.68 $5.18 $1.84 1333 1,600 3.11 3.91 1.15 1426 1,500 5.18 5.75 1.61 1437 1,700 4.14 3.68 1.55 1510 1,400 2.59 3.74 1.61 1522 1,200 3.45 4.49 0.92 1573 3,700 2.07 2.88 1.38 1626 1,700 5.41 6.90 1.73 From the information above, determine...

Exercise 10-4 [Partially correct answer.] Your answer is partially correct. Try again. Myers Company uses a...

Exercise 10-4 [Partially correct answer.] Your answer is partially correct. Try again. Myers Company uses a flexible budget for manufacturing overhead based on direct labor hours. Variable manufacturing overhead costs per direct labor hour are as follows. Indirect labor $1.00 Indirect materials 0.70 Utilities 0.40 Fixed overhead costs per month are Supervision $4,200, Depreciation $1,800, and Property Taxes $600. The company believes it will normally operate in a range of 7,000–13,000 direct labor hours per month. Assume that in July...

Exercise 12-10 (Video) Your answer is partially correct. Try again. Vilas Company is considering a capital...

Exercise 12-10 (Video) Your answer is partially correct. Try again. Vilas Company is considering a capital investment of $193,500 in additional productive facilities. The new machinery is expected to have a useful life of 5 years with no salvage value. Depreciation is by the straight-line method. During the life of the investment, annual net income and net annual cash flows are expected to be $12,771 and $45,000, respectively. Vilas has a 12% cost of capital rate, which is the required...