The tax rate is 40 During 2013 there were 40000 shares of convertible preferred

The tax rate is 40 during 2013 there were 40000

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The tax rate is 40%.During 2013, there were 40,000 shares of convertible preferred stock outstanding. The preferred is $100 par, pays $3.50 a year dividend, and is convertible into three shares of common stock.Colson issued $2,000,000 of 8% convertible bonds at face value during 2012. Each $1,000 bond is convertible into 30 shares of common stock.InstructionsCompute diluted earnings per share for 2013. Complete the schedule and show all computations.NetAdjust-AdjustedAdjust-AdjustedSecurityIncomementNet IncomeSharesmentSharesEPSSolution 16-145NetAdjust-AdjustedAdjust-AdjustedSecurityIncomementNet IncomeSharesmentSharesEPSCom. Stock$600,000$(140,000)$460,000200,0005,000a205,000$2.24Options460,000205,0006,000b211,0002.18Bonds460,00096,000c556,000211,00060,000271,0002.05Preferred556,000140,000696,000271,000120,000391,0001.78a20,000 × 3/4 =15,00030,000 × 1/3 =(10,000)5,000SA16 - 46
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Dilutive Securities and Earnings per ShareSolution 16-145(Cont.)b30,000$1,200,000 ÷ $50 = (24,000)(or) [(50 – 40) ÷ 50] × 30,000 = 6,000SA6,000SA$96,000$140,000c$2,000,000 × .08 × .6 = $96,000———— = $1.60———— = $1.1760,000120,000Pr. 16-146—Basic and diluted EPS.Assume that the following data relative to Kane Company for 2013 is available:Net Income$2,100,000Transactions in Common SharesChangeCumulativeJan. 1, 2013, Beginning number700,000Mar. 1, 2013, Purchase of treasury shares(60,000)640,000June 1, 2013, Stock split 2-1640,0001,280,000Nov. 1, 2013, Issuance of shares180,0001,460,0008% Cumulative Convertible Preferred StockSold at par, convertible into 200,000 shares of common(adjusted for split).$1,000,000Stock OptionsExercisable at the option price of $25 per share. Average market price in 2013, $30 (market price and option price adjusted for split).90,000 sharesInstructions (a)Compute the basic earnings per share for 2013. (Round to the nearest penny.)(b)Compute the diluted earnings per share for 2013. (Round to the nearest penny.)Solution 16-146 Computation of weighted average shares outstanding during the year: January 1Outstanding700,000March 1Repurchase (5/6 × 60,000)(50,000)650,000June 12-for-1 split1,300,000November 1Issued (1/6 × 180,000)30,0001,330,00016 - 47
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Test Bank for Intermediate Accounting, Fourteenth EditionSolution 16-146(Cont.)Additional shares for purposes of diluted earnings per share:Potentially dilutive securities8% convertible preferred stock200,000Stock optionsProceeds from exercise of 90,000 options (90,000 × $25)$2,250,000Shares issued upon exercise of options90,000Less: treasury stock purchasable with proceeds ($2,250,000 ÷ $30)75,00015,000Dilutive securities—additional shares215,000$2,100,000 – $80,000 $2,100,000Pr. 16-147—Basic and diluted EPS.Presented below is information related to Starr Company.1.Net Income [including an extraordinary gain (net of tax) of $70,000]$280,0002.Capital Structure
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