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Diluted EPS: Convertible bonds & Convertible preferred stock

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On Jan 1 Yellow Car Company issued 15-year, $50,000,000 face value, 4% bonds, at par value.
Each $1,000 bond is convertible into 20 shares of Yellow Car common stock.
The bonds were not converted in the current year.

Yellow Car's net income in the current year was $8,680,000, and its tax rate was 30%.
The company had 2,650,000 shares of common stock issued and outstanding throughout the current year.

(a) Solve for diluted EPS for the current year.
(b) Solve for diluted EPS for the current year, using the data found above, except instead of the bods, $50,000,000 of 6% convertible preferred stock was issued. Each $100 preferred share is convertible into 2 shares of Yellow Car common stock.

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Solution Summary

Your tutorial is attached. Notice the test for anti-dilutive securities for diluted EPS.

$2.19
Similar Posting

Myco basic diluted EPS convertible bonds preferred options

At January1,2013 Myco Corporation had outstanding the following securities:
$1,000,000, 5% cumulative convertible preferred shares,$50 par; each share is convertible into 2 shares of common stock.
7% convertible bonds, $2,000,000 face value issued at par ($1,000) per bond. Each bond is convertible into 30 shares of common stock
$6,000,000 common stock, $10 par value

Additional information:
a. On April 1, 2013, Myco purchased 100,000 shares of its common stock as treasury stock.
b. June 30, 2013, Myco issued a 4%stock dividend
c. On October 31, 2013, 50,000 shares of treasury stock were sold.
d. Common stock option outstanding as of 12/31/12 and exercisable in 2013 to purchase 40,000shares at an exercise price of $30
e. The market price of the stock peaked on October 31,2013 at $50 an on December 31, 2013 the market price of the stock closed at $30,; the average market price of stock during 2013 was $40
f. Net income for the year ended December 31, 2013 was $1,500,000
g. The income tax rate for 2013 was 40%
Required:
1.Compute Myco 's basic earnings per share for the year ended December 31, 2013.
2. Compute Myco's diluted earnings per share for the year ended December 31, 2013.

Show the calculation at how you arrived at your answer.

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