SLL, Inc., a Delaware corporation, sells customized backpacks in a small shop in Pikesville, MD. The...
SLL, Inc., a Delaware corporation, sells customized backpacks in a small shop in Pikesville, MD.
The corporation has issued 714,000 shares of $5 par common stock.
The following table summarizes the contributed capital portion of the company's Balance Sheet.
| Common stock, authorized | 1,000,000 | shares |
| Par value | $5 | per share |
| Common stock, Issued and Outstanding | 714,000 | shares |
The Board of Directors of SLL, Inc. announced its strategic plan for global expansion, which included selling its customized backpacks online.
On January 1, 20X8, SLL issued 1,000 convertible bonds to generate the cash need for Website development and a larger distribution plant.
As expected, SLL, Inc. met projected sales budgets and contained costs as reported on the pro forma financial statements that were made available to prospective bond investors.
| Assume: | Dec 31, 20X8 | |
| Net Income | $373,854 | |
| Bonds issued | 1,000 | convertible bonds |
| Bond term | 5 | years |
| Bonds face value | $1,000 | |
| Bonds contract rate of interest | 5% | |
| Bond convertible into | 200 | shares of common stock for each $1,000 bond |
| # of shares issued in converted | 200,000 |
The table above summarizes the 20X8 operations.
Use the above to calculate diluted EPS in 20X8 (show your work).
Hints:
1. Ignore income tax effects for this problem.
2. Basic EPS in 20X8 = $0.52
3. Answer is in dollars. To enter cents, use decimals. (EX, 12 cents = $0.12)
4. Diluted EPS calculations have a higher net income because it is adjusted for the lack of bond interest expense and higher number of shares outstanding.
Possible Incorrect Answers Include: $0.46 and/or $0.41
Homework Answers
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