INTERMEDIATE ACCOUNTING ACCESS
9th Edition
ISBN: 9781260790177
Author: SPICELAND
Publisher: MCGRAW-HILL CUSTOM PUBLISHING
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Textbook Question
Chapter 19, Problem 19.14P
EPS; convertible preferred stock; convertible bonds; order of entry
• LO19–7, LO19–9, LO19–10
Information from the financial statements of Henderson-Niles Industries included the following at December 31, 2018:
| Common shares outstanding throughout the year | 100 million |
| Convertible |
60 million |
| Convertible 10% bonds (convertible into 13.5 million shares of common) | $900 million |
Henderson-Niles’s net income for the year ended December 31, 2018, is $520 million. The income tax rate is 40%. Henderson-Niles paid dividends of $2 per share on its preferred stock during 2018.
Required:
Compute basic and diluted earnings per share for the year ended December 31, 2018.
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Students have asked these similar questions
Problem 7-6 (IAA)
Kareń Company showed the following accounts on December
31, 2020.
5,000,000
250,000
Bonds payable
Premium on bonds payable
Share capital – 250,000 shares authorized and
200,000 shares issued, P50 par
Share premium -issuance
Share premium - conversion privilege
Retained earnings
10,000,000
2,000,000
500,000
2,500,000
The bonds are convertible into 10 shares of capital for every
P1,000 bond.
On December 31, 2020, the entire bond issue was converted
and on this date, the market value of the share is 120 and
the market value of the bonds is 103.
The entity paid P200,000 as a result of the bond conversion.
Required:
Prepare journal entries for the conversion of the bonds on
December 31, 2020.
29/4/2021
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P12-14
Share repurchase : The following financial information is available on the Bond Recording Company:
Earnings
available
to
$ 800,000
common
shareholders
Number of common shares outstanding
400,000
Earnings per share ($ 800,000 +400,000)
$ 2
Market price per share
$ 20
Price / Earning Ratio (P / E) ($ 20 + $ 2)
10
The company is currently contemplating whether to use $ 400,000 of its earnings to pay cash dividends of $ 1 per share or to
buy back shares at $ 21 per share.
About how many shares can the
company buy back at the price of $ 21 per share using the funds that would be used to pay the dividend in cash?
а.
b.
Calculate EPS after repurchase.
Explain your calculations.
С.
If the shares are sold at a price
10 times higher than the earnings, what will the market price be after the buyback?
Compare the positions of the
shareholders under the dividend payment and share buyback alternatives. What are the tax implications…
Current Attempt in Progress
The information below pertains to Crane 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
1,990,000
6% convertible, cumulative preferred stock, $100 par value; each share is convertible
into 3 shares of common stock
3,860,000
Common stock, $10 par value
5,880,000
Tax rate for 2021
20%
Average market price of common stock
$25 per share
There were no changes during 2021 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 72,400 shares of common stock
at $20 per share.
(a) Compute basic earnings per share for 2021. (Round answer to 2 decimal places, eg. $2.55.)
Basic earnings per share
$
(b) Compute diluted earnings per share for 2021. (Round answer to 2 decimal places, eg. $2.55.)
Diluted earnings per share
Chapter 19 Solutions
INTERMEDIATE ACCOUNTING ACCESS
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