Question

1-

On January 1, 2020, Blossom Company issued 10-year, $1,900,000 face value, 6% bonds, at par. Each $1,000 bond is convertible into 14 shares of Blossom common stock. Blossom’s net income in 2020 was $509,850, and its tax rate was 20%. The company had 99,000 shares of common stock outstanding throughout 2020. None of the bonds were converted in 2020.

(a) Compute diluted earnings per share for 2020. (Round answer to 2 decimal places, e.g. $2.55.)

Diluted earnings per share

$enter diluted earnings per share rounded to 2 decimal places

(b) Compute diluted earnings per share for 2020, assuming the same facts as above, except that $990,000 of 6% convertible preferred stock was issued instead of the bonds. Each $100 preferred share is convertible into 5 shares of Blossom common stock. (Round answer to 2 decimal places, e.g. $2.55.)

Diluted earnings per share

$enter diluted earnings per share rounded to 2 decimal places

2-

On January 1, 2021, Sarasota Corp. had 478,000 shares of common stock outstanding. During 2021, it had the following transactions that affected the Common Stock account. February 1 Issued 120,000 shares March 1 Issued a 10% stock dividend May 1 Acquired 102,000 shares of treasury stock June 1 Issued a 3-for-1 stock split October 1 Reissued 59,000 shares of treasury stock - Determine the weighted-average number of shares outstanding as of December 31, 2021. The weighted-average number of shares outstanding - Assume that Sarasota Corp. earned net income of $3,582,000 during 2021. In addition, it had 100,000 shares of 9%, $100 par nonconvertible, noncumulative preferred stock outstanding for the entire year. Because of liquidity considerations, however, the company did not declare and pay a preferred dividend in 2021. Compute earnings per share for 2018, using the weighted-average number of shares determined in part (a) - Assume the same facts as in part (b), except that the preferred stock was cumulative. Compute earnings per share for 2021. - Assume the same facts as in part (b), except that net income included a loss from discontinued operations of $441,000 (net of tax). Compute earnings per share for 2021.

Answer 1

De diluted Earnings per share for 2020 - Adjusted Net Income Adjusted shares calculate Adjusted Net Inw me! Net Income for the year = $509,850 Add: Adjustment for interest (1909000 X60% x C1-0.20) 3 91,200 Adjusted Net Income -5 $601,050 Calolate Adjusted shares: weighted Average no. of shares outstanding = 990000 Add! shoue assumed to Issue : 26,600 (1900,000 X 14 shoue) ($1000 Bonds ? Adjuste shoues - 125,600 Diluted Corning per share for 2020 Goloso 125,000 = $44.78

shares Pershare value Income (A) Св) 509,850 (59,400) 99,000 $ 21.55 - Particulars Net Income Lessi preferred stock . Dividend (990000 X6%) Basic EPS 450,450 Add: Convertible - Preferred stock* $59,400 49,500 Diluted EPS $509,850 148500 $3.43 * convertible prelained stock - 990000 x 5shaves = 49,500 shouls 100 Diluted willed Earning fanina pes share pesh = $509,850 TH9,500 (2020) = $3.43

2)a) No. of Months 12 Heighted shares ol 1/12 131,450 1624,450 w 120,000 Istock. stock shares dividend split Ioate Particolar outstanding Restaelement restatement Iloil2021 Beginning Balance 478000 loz2021/ issued shores of 59800 0 11 (478000 +120000) 1103/2021/ stock dividend | 657,800 @iol. (598000 X1.1) los/2024 Re acquired shares 555,800 of loi,ooo K657800 - 102000) hilo6l2021/ stock split Issued:1667,400 3 for stock split (555,800 x3) 322,900 wo 112 138,950 w 4112 555,800 ilol2021) Reissued shaies 11,726,400 3/12 1..431,600 of 59000 |(1667, 400+59000 Weighted. Average Number of sheues Outstanding +1751, 150

1 b) Eaining per share (Prefewed shocks is non commodations = (Net Income - Preferred dividend) weighted Average shares - $3582,000 - $0 1751,150 $ 2104 - o) Earning per share (Preferred stockis Commulative = Net Income - Preferred dividend* weighted Avreage shares = $358 2,000 - $900.000* 1751,150 = 2682,000 => $1.53 1751,150 Preferred divided = 100,000 - 900000 = 3582000 Net Income Add: loss from discontinued - opeations : 2141000 Income from Contruing Opentiene 4023,000 Euning per shore Income from Continuing Opeeation = 2:29 12023,000 17,751150 loss from discontinued Opeeation = (0.25) (461000 ) (1,751,150 , Net Income a zook