Alciatore Company reported a net income of $150,000 in 2018. The weighted-average number of commonshares outstanding for 2018 was 40,000. The average stock price for 2018 was $33. Assume an income tax rateof 40%.Required:For each of the following independent situations, indicate whether the effect of the security is antidilutive fordiluted EPS.1. 10,000 shares of 7.7% of $100 par convertible, cumulative preferred stock. Each share may be converted intotwo common shares.2. 8% convertible 10-year, $500,000 of bonds, issued at face value. The bonds are convertible to 5,000 shares ofcommon stock.3. Stock options exercisable at $30 per share after January 1, 2020.4. Warrants for 1,000 common shares with an exercise price of $35 per share.5. A contingent agreement to issue 5,000 shares of stock to the company president if net income is at least$125,000 in 2019.
Alciatore Company reported a net income of $150,000 in 2018. The weighted-average number of common
shares outstanding for 2018 was 40,000. The average stock price for 2018 was $33. Assume an income tax rate
of 40%.
Required:
For each of the following independent situations, indicate whether the effect of the security is antidilutive for
diluted EPS.
1. 10,000 shares of 7.7% of $100 par convertible, cumulative
two common shares.
2. 8% convertible 10-year, $500,000 of bonds, issued at face value. The bonds are convertible to 5,000 shares of
common stock.
3. Stock options exercisable at $30 per share after January 1, 2020.
4. Warrants for 1,000 common shares with an exercise price of $35 per share.
5. A contingent agreement to issue 5,000 shares of stock to the company president if net income is at least
$125,000 in 2019.
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