Partial balance sheet for year ended Dec.31,2009: 9% convertible Bonds(issued at
ID: 2442938 • Letter: P
Question
Partial balance sheet for year ended Dec.31,2009:9% convertible Bonds(issued at par)...........................$1,800,000
C/S, 180,000 shares issued and O/S, $50par....................9,000,000
a) Each $1,000 convertible bond can be converted into 80 shares of c/s
b) On Sept. 1,2010 1/3 of the convertible debt was converted into c/s
c) Reported net income of $1,550,000 in 2010. The income tax rate was 30%
d) No other stock transactions during 2010
What is BEPS for 2010?
What is diluted EPS for 2010?
Explanation / Answer
BEPS=(NI-Pref Div)?#common shares outstanding=(1,550,000-0)/180,000=$8.61/sh DEPS=(NI- Pref. Div. + Int Exp(bonds)(1-.30)*4/12)/180,000+4000=(1,550,000+1/3*1,800,000*.09(1-.30)*4/12)/184,000=(1,550,000+600,000*.09*.7*4/12)/184,000=(1,550,000 +12,600)/184,000=$8.49/sh (1,800,000*1/3)/50=12,000sh*4/12=4000sh 4/12 outstanding bfrom Sep1 to Dec31 = 4 months