Question

Sunland Corporation had net income of $50,500 for the year ended December 31, 2020, and a...

Sunland Corporation had net income of $50,500 for the year ended December 31, 2020, and a weighted average number of common shares outstanding of 12,400. The following information is provided regarding the capital structure:

1. 8% convertible debt, 260 bonds each convertible into 42 common shares. The bonds were outstanding for the entire year. The income tax rate is 40%. The bonds were issued at par ($1,150 per bond). No bonds were converted during the year.
2.

3% convertible, cumulative $110 preferred shares, 1,100 shares issued and outstanding. Each preferred share is convertible into 4 common shares. The preferred shares were issued at par and were outstanding the entire year. No shares were converted during the year.

Calculate the income effect of the dividends on preferred shares.

Dividends on preferred shares

Calculate the basic earnings per share for 2020

. (Round answer to 2 decimal places, e.g. 15.25.)

Basic earnings per share

$enter the Basic earnings per share in dollars rounded to 2 decimal places

Calculate the after-tax interest paid on the 8% bonds.

After-tax interest on bonds converted $enter the After-tax interest on bonds converted in dollars

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Part 4

Incorrect answer iconYour answer is incorrect.

Determine an incremental per share effect for 8% bonds. (Round earnings per share to 2 decimal places, e.g. 15.25.)

Potentially dilutive security Incremental
Numerator Effect
Incremental
Denominator Effect
EPS

8% Bonds

$enter a dollar amount enter a dollar amount $enter a dollar amount rounded to 2 decimal places

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Part 5

Incorrect answer iconYour answer is incorrect.

Determine an incremental per share effect for 3% preferred shares. (Round earnings per share to 2 decimal places, e.g. 15.25.)

Potentially dilutive security Incremental
Numerator Effect
Incremental
Denominator Effect
EPS

3% Preferred shares

$enter a dollar amount enter a dollar amount $enter a dollar amount rounded to 2 decimal places

Calculate the diluted earnings per share for 2020, using the if–converted method. For simplicity, ignore the requirement to record the debt and equity components of the bonds separately. (Round earnings per share to 2 decimal places, e.g. 15.25.)

Numerator Denominator EPS

Basic

$enter a dollar amount enter a dollar amount $enter a dollar amount rounded to 2 decimal places

Bonds

enter a dollar amount enter a dollar amount

Sub Total

enter a dollar amount enter a dollar amount enter a dollar amount rounded to 2 decimal places

Preferredd shares

enter a dollar amount enter a dollar amount
$enter a total amount enter a total amount $enter a dollar amount rounded to 2 decimal places
Diluted EPS enter the diluted earnings per share in dollars
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