Rich Pugh AC302-Unit3ExcelTemplate

# Rich Pugh AC302-Unit3ExcelTemplate - Walker Company has...

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Unformatted text preview: Walker Company has 15,000 shares of common stock outstanding during all of 2010. It also has two convertible securities outstanding at the end of 2010. These are: 1. Convertible preferred stock: 1,000 shares of 9%, \$100 par, preferred stock were issued in 2009 for \$140 per share. Each share of preferred stock is convertible into 3.5 shares of common stock. The current dividends have been paid. To date, no preferred stock has been converted. 2. Convertible bonds: Bonds with a face value of \$100,000 and an interest rate of 10% were issued at par on July 6, 2010. Each \$1,000 bond is convertible into 35 shares of common stock. To date, no bonds have been converted. The company earned net income of \$54,000 during 2010. Its income tax rate is 30%. Required Compute the 2010 diluted earnings per share. What earnings per share amount(s) would Walker report on its E17-9 Convertible Securities and Earnings per Share 2010 income statement? (round to two decimal places, where appropriate) Name: An asterisk (*) will appear next to an incorrect amount(s) in the outlined cell(s). If you are still getting a red asterisk, and think the answer is correct, but used a formula in the cell try manually typing in the answer according to the rounding instructions. Required Compute the 2010 diluted earnings per share. What earnings per share amount(s) would Walker report on its Earnings Shares Earnings Explanation (Adjustments) ÷ (Adjustments) = Per Share Basic earnings and shares \$45,000 ÷ 15,000 = \$3.00 Basic Bond interest expense savings 3,500 Increment in common shares (1/2 year) 1,750 Tentative diluted EPS \$48,500 ÷ \$16,750 = \$2.90 9,000 Increment in common shares 3,500 Diluted earnings and shares \$57,500 ÷ \$20,250 = \$2.84 Diluted Net Income- Preferred Dividends = Basic EPS Earnings 54,000 9,000 45,000 x 12/12 = 1 = Basic EPS Shares 15,000 1 15,000 Impact on diluted earnings per share and ranking: Impact Ranking Preferred: \$9,000 \$2.57 2 3,500 Bonds: \$3,500 \$2.00 1 1,750 Complete the paragraph above by selecting the word, number, or phrase that best fits the corresponding number (you may use an answer more than once). (1) \$3.00 (2) \$2.84 E17-9 Convertible Securities and Earnings per Share 2010 income statement? (round to two decimal places, where appropriate) a b (1/2 year) d c c DEPS 1 Preferred dividend savings e c c a Common Stock Outstanding b c Walker would report basic earnings per share of (1) and diluted earnings per share of (2) on its 2010 income statement. Name: Solutions An asterisk (*) will appear next to an incorrect amount(s) in the outlined cell(s). If you are still getting a red asterisk, and think the answer is correct, but used a formula in the cell try manually typing in the answer according to the rounding instructions....
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Rich Pugh AC302-Unit3ExcelTemplate - Walker Company has...

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