Question

can someone please assist with these questions

Chapter 19-Earnings per Share 89. FGH had 5,000 common shares outstanding on December 31, 20x2. An additional 1,000 common shares were issued on April 1, 20x3, and 500 more on July 1, 20x3. On October 1, 20x3, FGH issued 10, $1,000 maturity value, 7 percent convertible bonds. Each bond is convertible into 40 common shares. No bonds were converted into common shares in 20x3. What was the aumber of shares that should be used to compute basic earnings per share and diluted earnings per share, respectively, for the year ended December 31, 20x3 (ignore anti-dilution)? A) 5,750 and 5,950 shares B) 5,750 and 6,150 shares C) 6,000 and 6,100 shares D) 6,000 and 6,400 shares Ans: C Difficulty: Medium Level of Learning: Application Topic: LO3 90. On January 2, 20x3, CBA issued at par $10,000 of 8 percent bonds convertible into 2,000 of CBA's common shares. No bonds were converted during 20x3. Throughout 20x3, CBA had 2,000 common shares outstanding. CBA's net income after tax was $1,000. CBA's income tax rate is 50 percent. No potentially dilutive securities other than the convertible bonds were outstanding during 20x3. CBA's basic EPS and diluted EPS for 20x3 would be: A) Basic EPS S0.30; diluted EPS $0.45 Basic EPS S0.50; diluted EPS $0.35 Basic EPS $0.70; diluted EPS $0.25 B) C) Basic EPS $0.90; diluted EPS SO.15 D) Ans: B Difficulty: Medium Level of Learning: Application Topic: LO2, 3 91. At December 31, 20x2, BCD had 700 common shares outstanding. On September 1, 20x3, an additional 300 common shares were issued. In addition, BCD had $20,000 of 8 percent, convertible bonds outstanding December 31, 20x2, which are convertible into 400 common shares. No bonds were converted into common shares in 20x3. Net income for the year ended December 31, 20x3, was $6,000. Assuming the income tax rate was 50 percent, what should be the basic earnings per share for the year ended December 31, 203? A) B) C) D) $7.50 $5.67 $5.00 $4.33 Anc A Difoulty: Medium Level of Learning: Application Topic: LO2

Answer 1

89	C) 6,000 and 6,100 shares
	Weighted average shares for basic earnings per share
	Date	No of Shares	Weight
	Jan 1, 20x3	5,000	1	5,000
	Apr 1, 20x3	1,000	0.75	750
	July 1, 20x3	500	0.5	250
				6,000
	Weighted average shares for diluted earnings per share
	Date	No of Shares	Weight
	Jan 1, 20x3	5,000	1	5,000
	Apr 1, 20x3	1,000	0.75	750
	July 1, 20x3	500	0.5	250
	Oct 1, 20x3	400	0.25	100
				6,100
90
	Basic EPS =	(Net Income−Preferred Dividends)/WASO
	Basic EPS =	($1,000 - $0)/2,000
	Basic EPS =	$0.50
	​   Diluted EPS =	[(Net Income−Preferred Dividends) + (convertible debt interest x (1-t)] /WASO+CDS
	​   Diluted EPS =	[($1,000 - $0) + ($800 x 0.5)] /2,000 + 2,000
	​   Diluted EPS =	$0.35
91	A) $7.50
	Basic EPS =	(Net Income−Preferred Dividends)/WASO
	Basic EPS =	($6,000 - $0)/800
	Basic EPS =	$7.50
	Weighted average shares for basic earnings per share
	Date	No of Shares	Weight
	Jan 1, 20x3	700	1	700
	Sep 1, 20x3	300	0.33	100
				800