An excerpt from the statement of financial position of Crane Limited follows:
CRANE LIMITED | |||||
Selected Statement of Financial Position Information | |||||
At December 31, 2020 | |||||
Long-term debt | |||||
Notes payable, 10% | $5,122,000 | ||||
4% convertible bonds payable | 2,163,000 | ||||
6% convertible bonds payable | 2,892,000 | ||||
Total long-term debt | $10,177,000 | ||||
Shareholders' equity | |||||
$0.66 cumulative, no par value, convertible preferred shares (unlimited number of shares authorized, 571,500 shares issued and outstanding) | $2,857,500 | ||||
Common shares, no par value (7,499,400 shares authorized, 2,752,100 shares issued and outstanding) | 25,766,000 | ||||
Contributed surplus | 218,200 | ||||
Retained earnings | 6,741,400 | ||||
Total shareholders’ equity | $35,583,100 |
Notes and Assumptions
December 31, 2020
1. | Options were granted/written in 2019 that give the holder the right to purchase 99,400 common shares at $8 per share. The average market price of the company’s common shares during 2020 was $14 per share. The options expire in 2028 and no options were exercised in 2020. | |
2. | The 4% bonds were issued in 2019 at face value. The 6% bonds were issued on June 1, 2020, at face value. Each bond has a face value of $1,000 and is convertible into 100 common shares. | |
3. | The convertible preferred shares were issued at the beginning of 2020. Each share of preferred is convertible into one common share. | |
4. | The average income tax rate is 25%. | |
5. | The common shares were outstanding during the entire year. | |
6. | Preferred dividends were not declared in 2020. | |
7. | Net income was $2,255,500 in 2020. | |
8. | No bonds or preferred shares were converted during 2020. |
Part 1
Calculate the income effect of the dividends on preferred shares.
Dividends on preferred shares | $ |
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Part 2
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Part 3
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Part 10
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