On January 2, 2019, Gino Co. issued at par $200,000 of 9% convertible bonds. Each $1,000...
On January 2, 2019, Gino Co. issued at par $200,000 of 9% convertible bonds. Each $1,000 bond is convertible into 20 shares. No bonds were converted during 2019. Gino had 50,000 shares of common stock outstanding during 2019. Gino's 2019 net income was $150,000 and the income tax rate was 25%. Compute Gino's EPS and diluted earnings per share for 2019 (rounded to the nearest penny). Show all computations
Homework Answers
| a.) | Earnings for Basic EPS equals to Net Income | 150,000 | |
| Shares for Basic EPS equals to Common stock outstanding | 50,000 | ||
| Basic EPS | $ 3.00 | =150000/50000 | |
| (Earnings / Shares ) | |||
| b.) | Net Income | 150,000 | |
| Add: Interest on Bond, Net of tax | 13,500 | =200000*9%*(1-25%) | |
| Earnings for Diluted EPS | $ 163,500 | ||
| Number of Common stock | 50,000 | ||
| Add: Number of Common stock convertible from Bond | 4,000 | =200000*20/1000 | |
| Shares for Diluted EPS | 54,000 | ||
| Diluted earning per share for 2019 | $ 3.03 | =163500/54000 | |
| (Earnings / Shares ) | |||
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