E16-20 - = $5,460 = 2,000 + 6,000 8,000 2 Revenues...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
E16-20 (LO 7) issued, at par, 60 $1,000, 8% bonds, each convertible into 100 shares of common stock. Chirac had revenues of $17,500 and expenses other than interest and taxes of $8,400 for 2007. (Assume that the tax rate is 40%.) Throughout 2007, 2,000 shares of common stock were outstanding; none of the bonds was converted or redeemed. Instructions 1 Compute diluted earnings per share for 2007. 2 Assume the same facts as those assumed for part (a), except that the 60 bonds were issued on September 1, 2007 (rather than in 2006), and none have been converted or redeemed 3 Assume the same facts as assumed for part (a), except that 20 of the 60 bonds were actually converted on July 1, 2007. SOLUTIONS 1 Revenues Expenses Other than interest Bond interest (60 X $1,000 X .08) Income before income taxes Income taxes (40%) Net income Diluted earnings per share: $2,580 + (1 - .40)($4,800)
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 2
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 4
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: = $5,460 = 2,000 + 6,000 8,000 2 Revenues Expenses: Other than interest Bond interest (60 X $1,000 X .08 X 4/12) Income before income taxes Income taxes (40%) Net income Diluted earnings per share: $4,500 + (1.40)($1,600) = $5,460 = 2,000 + (6,000 X 1/3 yr.) 4,000 3 Revenues Expenses: Other than interest (EPS with Convertible Bonds, Various Situations) In 2006 Chirac Enterprises Bond interest (60 X $1,000 X .08 X 1/2 Bond interest (40 X $1,000 X .08 X 1/2) Income before income taxes Income taxes (40%) Net income Diluted earnings per share: $3,060 + (1.40)($4,000) = $5,460 = 2,000 + (2,000 X 1/2 yr.) + 4,000 + (2,000 X 1/2) 8,000 $17,500 $8,400 4,800 13,200 4,300 1,720 $2,580 $0.68 $17,500 $8,400 1,600 10,000 7,500 3,000 $4,500 $1.37 $17,500 $8,400 2,400 1,600 12,400 5,100 2,040 $3,060 $0.68...
View Full Document

This note was uploaded on 08/14/2011 for the course ACCT 423 taught by Professor R.becksted during the Spring '09 term at University of Phoenix.

Page1 / 4

E16-20 - = $5,460 = 2,000 + 6,000 8,000 2 Revenues...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online