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Bookmarks People Tab Window Help 69% Thu 10:33 AM a Ch 16: Homework Problems x C Question 10/1 View Policies Sl X 3-5 Ch16.pptx: ACC 302: Inter X G how to screenshot on mac - 6 x + es/1964931/assignments/10428851 Question 1 View Policies Show Attempt History Current Attempt in Progress * Your answer is incorrect. On January 1, 2020, Blue Company issued 10-year, $1,880,000 face value, 6% bonds, at par. Each $1,000 bond is convertible into 14 shares of Blue common stock. Blue's net income in 2020 was $522,500, and its tax rate was 20%. The company had 110,000 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 $ 3.93 (b) Compute diluted earnings per share for 2020, assuming the same facts as above, except that $1,100,000 of 6% convertible preferred stock was issued instead of the bonds. Each $100 preferred share is convertible into 5 shares of Blue common stock. (Round answer to 2 decimal places, e.g. $2.55.) Diluted earnings per share $ 2.03 e Textbook and Media Save for Later Attempts: 2 of 10 used Submit Answer - Sunced to Cadebook MacBook Pro 151 이 + 4 5 II

Answer 1

(a) Diluted Earning per share for 2020

Particular	Amount	Amount
Net Income		$522,500
Add: Interest Saving(net of tax)	$112,800(1-.20)	$90,240
Adjusted Net Income		$612,740

Each $1000 bond is convertible into 14 shares of blue common stock. Thus :

Number of Bond = $1,880,000 / $1000 = 1,880

Each will be converted into 14 shares i.e. 1,880 * 14 = 26,320 shares

Diluted Earning per share = 612,740 / (110,000 + 26,320) = $4.50

(b) Outstanding shares =  110,000

Share assumed to be issued= 11,000 * 5= 55,000

(Note:($1,100,000 / $100)= 11,000)

Total Outstanding shares = 110,000 + 55,000 = 165,000

Diluted Earning per share = $522,500 / 165,000 = $3.2