Computing Basic and Diluted EPS, Convertible Bonds,
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Chapter 20 Solutions
INTERMEDIATE ACCOUNTING
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- JackieStamping began the current year with 470,000common shares outstanding and issued an additional 120,000shares on September1. The firm has $11,300,000, 1.5% convertible bonds on June 30 (i.e., $169,500coupon interest annually), which are convertible into 331,000 shares of common stock. The firm issued the bonds at par and did not convert any during the current year. It also had $1,170,000 par value, 4%nonconvertible, noncumulative preferred stock outstanding for the full year and declared dividends for the current year. The company is subject to a 40%effective tax rate and net income is $4,100,000. RequirementBased on this information, compute basic and diluted earnings per share for the current year.arrow_forwardOn January 1, 2X16, Manila Co. has 100,000 outstanding ordinary shares. During the year, Manila Co. reported a net income of P5,000,000. The income tax rate is 30%. Besides, Manila Co. has 4,000, 10% convertible bonds with 1,000 face amount. Each bond is convertible into five (5) ordinary shares. Required: Solve for the following: 1. Determine the amount of basic earnings per share for the year. 2. Determine the amount of diluted earnings per share under each of the following scenarios. a. Bonds were issued on January 1, 2X16, and there were no conversions made during the year. b. Bonds were issued on April 1, 2X16, and there were no conversions made during the year. c. Bonds were issued in the previous year and were converted on October 1, 2X16.arrow_forwardABC, Inc.,has 757 shares of common stock outstanding at a price of $62 a share. They alsohave 197 shares of preferred stock outstanding at a price of $69 a share. Thereare 276, 8 percent bonds outstanding that are priced at $50. The bonds maturein 16 years and pay interest semiannually. What is the capital structure weightof the preferred stock?Enter your answer as a percentage rounded off to two decimalpoints. Do not enter % in the answer box.arrow_forward
- Company A has 279,000 basic shares outstanding and 26,000 outstanding options and warrants. The exercise price of these options is $3.75. The company also has $200,000 of convertible bonds with an effective conversion price of $4.00. The average market share price for the reporting period is $7.50. What is the diluted shares outstanding using the treasury stock method & if-converted methodsarrow_forwardAnswer both the subparts 1 and 2.if answered within 45mins,it would be helpful!! On January 1, 2X16, Manila Co. has 100,000 outstanding ordinary shares. During the year, Manila Co. reported a net income of P5,000,000. The income tax rate is 30%. Besides, Manila Co. has 4,000, 10% convertible bonds with 1,000 face amount. Each bond is convertible into five (5) ordinary shares. Required: Solve for the following: 1. Determine the amount of basic earnings per share for the year. 2. Determine the amount of diluted earnings per share under each of the following scenarios. a. Bonds were issued on January 1, 2X16, and there were no conversions made during the year. b. Bonds were issued on April 1, 2X16, and there were no conversions made during the year. c. Bonds were issued in the previous year and were converted on October 1, 2X16.arrow_forwardABC, Inc. has the following securities outstanding in the market. Common Stock 10,000,000 shares outstanding at a market price of $150.00. A recent analyst report shows these shares have a beta of 1.2. Preferred Stock 250,000 shares outstanding with a dividend of 5% of par. Market price is $75, a $50 discount to par. AA-Rated Corporate Bonds 750,000 bonds with par value of $1000 each and a semi-annual coupon of 7.5%. The bonds mature in 25 years and are currently selling at a price of 98.75. Today the expected return on the market is 8% and the market risk premium is 4%. The company has a marginal tax rate of 21%. What is ABC, Inc.'s WACC?arrow_forward
- Last year, XYZ Inc. reported net income of $220,000 and had 56,000 shares of common stock and 1,000 share of convertible preferred stock outstanding for the entire year. Each preferred share is $100 par value, pays 5% dividend, and is convertible to 25 shares of common stock. XYZ Inc. also had 200 convertible bonds oustanding for the entire year. Each convertible bond is $1000 par value, pays 3% interest and is convertible to 100 shares of common stock. The tax rate is 30%. What is the diluted earning per share?arrow_forwardAlchor, Inc., had 450,000 shares of common stock issued and outstanding at January 1. On July 1, an additional 50,000 shares of common stock were issued for cash. In November, Alchor purchased 12,000 shares of its own stock for $22 each, anticipating an upcoming exercise of options. Alchor had two potentially dilutive securities: a) 20,000 shares of 5% convertible, cumulative $100 par value preferred stock were outstanding all year. Each share of preferred stock is convertible into four shares of common stock. b) Alchor had $1,000,000 of 6% convertible bonds. Bond interest expense each year is decreased by $1,000 amortization of the premium. Each $1,000 bond is convertible into 30 shares of common stock. Alchor also had unexercised stock options to purchase 40,000 shares of common stock at $15 per share outstanding at the beginning and end of the year. The average market price of Alchor's common stock was $20 during the year. If net income is $1,250,000, and the tax rate is 21%, what…arrow_forwardDuring the current year, North Corporation had 2 million shares of common stock outstanding. Two thousand 10% convertible bonds, each with $1,000 face value, were issued at face amount at the beginning of the year. East reported net income of $2 million for the year. Each bond is convertible into 10 shares of common stock. The tax rate is 25%. What is diluted EPS (rounded)? A. $1.00. B. $0.90. C. $0.95. D. $1.10. -3-arrow_forward
- An analyst has gathered the following information about a company: 110,000 shares of common outstanding at the beginning of the year. The company repurchases 20,000 of its own common shares on July 1. Earnings are $300,000 for the year. 10,000 shares of existing 10 percent cumulative $100 par preferred outstanding that is not in arrears at the beginning or ending of the year. The company also has $1 million in 10 percent callable bonds outstanding. The company has declared a $0.50 dividend on the common.What is the company's diluted earnings per share?arrow_forwardYou are given the following information on Parrothead Enterprises: Debt: Common stock: Preferred stock: Market: 8,600 7.2 percent coupon bonds outstanding, with 23 years to maturity and a quoted price of 107. These bonds pay interest semiannually and have a par value of $2,000. WACC 285,000 shares of common stock selling for $65.70 per share. The stock has a beta of 1.02 and will pay a dividend of $3.90 next year. The dividend is expected to grow by 5.2 percent per year indefinitely. 9,200 shares of 4.6 percent preferred stock selling at $95.20 per share. The par value is $100 per share. 10.8 percent expected return, risk-free rate of 4.2 percent, and a 22 percent tax rate. Calculate the company's WACC. Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. %arrow_forwardConsider the following information for Evenflow Power Co., Debt: Common stock: 4,000 7 percent coupon bonds outstanding, $1,000 par value, 17 years to maturity, selling for 102 percent of par; the bonds make semiannual payments. 84,000 shares outstanding, selling for $59 per share; the beta is 1.17. 13,000 shares of 6.5 percent preferred stock outstanding, currently selling for $103 per share. 8.5 percent market risk premium and 6 percent risk-free rate. Preferred stock: Market: Assume the company's tax rate is 31 percent. Required: Find the WACC. (Do not round your intermediate calculations.)arrow_forward
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
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