Alciatore Company reported a net income of $150,000 in 2016. The weighted-average number of common shares outstanding for 2016 was 40,000. The average stock price for 2016 was $33. Assume an income tax rate of 40%. Required: For each of the following independent situations, indicate whether the effect of the security is antidilutive for diluted EPS. 1. 10,000 shares of 7.7% of $100 par convertible, cumulative preferred stock. Each share may be converted into two common shares. 2. 8% convertible 10-year, $500,000 of bonds, issued at face value. The bonds are convertible to 5,000 shares of common stock. 3. Stock options exercisable at $30 per share after January 1, 2018. 4. Warrants for 1,000 common shares with an exercise price of $35 per share. 5. A contingent agreement to issue 5,000 shares of stock to the company president if net income is at least $125,000 in 2017.
Alciatore Company reported a net income of $150,000 in 2016. The weighted-average number of common shares
outstanding for 2016 was 40,000. The average stock price for 2016 was $33. Assume an income tax rate of 40%.
Required:
For each of the following independent situations, indicate whether the effect of the security is antidilutive for
diluted EPS.
1. 10,000 shares of 7.7% of $100 par convertible, cumulative
two common shares.
2. 8% convertible 10-year, $500,000 of bonds, issued at face value. The bonds are convertible to 5,000 shares of
common stock. 3. Stock options exercisable at $30 per share after January 1, 2018.
4. Warrants for 1,000 common shares with an exercise price of $35 per share.
5. A contingent agreement to issue 5,000 shares of stock to the company president if net income is at least
$125,000 in 2017.
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