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An excerpt from the statement of financial position of Cullumber Limited follows: CULLUMBER LIMITED Selected Statement of Financial Position Information At December 31, 2023 Long-term debt Notes payable, 10% 4% convertible bonds payable 6% convertible bonds payable $5,800,000 2,050,000 3,720,000

An excerpt from the statement of financial position of Cullumber Limited follows: CULLUMBER LIMITED Selected Statement of Financial Position Information At December 31, 2023 Long-term debt Notes payable, 10% 4% convertible bonds payable 6% convertible bonds payable $5,800,000 2,050,000 3,720,000

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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An excerpt from the statement of financial position of Cullumber Limited follows: Long-term debt Shareholders' equity $0.68 cumulative, no par value, convertible preferred shares (unlimited number of shares authorized, 620,000 shares issued and outstanding) 1. 2. 3. Notes and Assumptions December 31, 2023 4. 5. CULLUMBER LIMITED Selected Statement of Financial Position Information At December 31, 2023 6. 7. Notes payable, 10% 4% convertible bonds payable 6% convertible bonds payable Total long-term debt 8. Common shares, no par value (8,000,000 shares authorized, 2,950,000 shares issued and outstanding) Contributed surplus Retained earnings Total shareholders' equity $5,800,000 2,050,000 3,720,000 $11,570,000 $3,100,000 28,025,000 280,000 7,900,000 $39,305,000 Options were granted/written in 2022 that give the holder the right to purchase 100,000 common shares at $9 per share. The average market price of the company's common shares during 2023 was $16 per share. The options expire in 2031 and no options were exercised in 2023. The average income tax rate is 25%. The common shares were outstanding during the entire year. Preferred dividends were not declared in 2023. Net income was $2,486,600 in 2023. No bonds or preferred shares were converted during 2023. The 4% bonds were issued in 2022 at face value. The 6% bonds were issued on June 1, 2023, at face value. Each bond has a face value of $1,000 and is convertible into 100 common shares. The convertible preferred shares were issued at the beginning of 2023. Each preferred share is convertible into one common share.
Transcribed Image Text:An excerpt from the statement of financial position of Cullumber Limited follows: Long-term debt Shareholders' equity $0.68 cumulative, no par value, convertible preferred shares (unlimited number of shares authorized, 620,000 shares issued and outstanding) 1. 2. 3. Notes and Assumptions December 31, 2023 4. 5. CULLUMBER LIMITED Selected Statement of Financial Position Information At December 31, 2023 6. 7. Notes payable, 10% 4% convertible bonds payable 6% convertible bonds payable Total long-term debt 8. Common shares, no par value (8,000,000 shares authorized, 2,950,000 shares issued and outstanding) Contributed surplus Retained earnings Total shareholders' equity $5,800,000 2,050,000 3,720,000 $11,570,000 $3,100,000 28,025,000 280,000 7,900,000 $39,305,000 Options were granted/written in 2022 that give the holder the right to purchase 100,000 common shares at $9 per share. The average market price of the company's common shares during 2023 was $16 per share. The options expire in 2031 and no options were exercised in 2023. The average income tax rate is 25%. The common shares were outstanding during the entire year. Preferred dividends were not declared in 2023. Net income was $2,486,600 in 2023. No bonds or preferred shares were converted during 2023. The 4% bonds were issued in 2022 at face value. The 6% bonds were issued on June 1, 2023, at face value. Each bond has a face value of $1,000 and is convertible into 100 common shares. The convertible preferred shares were issued at the beginning of 2023. Each preferred share is convertible into one common share.
Question 1 - 4 Calculate the after-tax interest paid on the 4% bonds. After-tax interest on 4% bonds converted $ eTextbook and Media Determine an incremental per share effect for 4% bonds. (Round earnings per share to 2 decimal places, e.g. 15.25.) Potentially dilutive security 4% Bonds eTextbook and Media Calculate the after-tax interest paid on the 6% bonds. After-tax interest on 6% bonds converted $ eTextbook and Media Incremental Numerator Effect Potentially dilutive security 6% Bonds Incremental Denominator Effect Determine an incremental per share effect for 6% bonds. (Round earnings per share to 2 decimal places, e.g. 15.25.) Incremental Numerator Effect $ Incremental Denominator Effect EPS EPS Question 5 - 6 Rank the potentially dilutive securities from most dilutive to least dilutive. 4% Bonds 6% Bonds $0.68 Preferred shares Options eTextbook and Media Calculate diluted earnings per share for 2023. (Round earnings per share to 2 decimal places, e.g. 15.25.) Basic Options Sub Total 4% bonds Sub Total 6% bonds Sub Total Diluted EPS $ $ Numerator Denominator $ EPS
Transcribed Image Text:Question 1 - 4 Calculate the after-tax interest paid on the 4% bonds. After-tax interest on 4% bonds converted $ eTextbook and Media Determine an incremental per share effect for 4% bonds. (Round earnings per share to 2 decimal places, e.g. 15.25.) Potentially dilutive security 4% Bonds eTextbook and Media Calculate the after-tax interest paid on the 6% bonds. After-tax interest on 6% bonds converted $ eTextbook and Media Incremental Numerator Effect Potentially dilutive security 6% Bonds Incremental Denominator Effect Determine an incremental per share effect for 6% bonds. (Round earnings per share to 2 decimal places, e.g. 15.25.) Incremental Numerator Effect $ Incremental Denominator Effect EPS EPS Question 5 - 6 Rank the potentially dilutive securities from most dilutive to least dilutive. 4% Bonds 6% Bonds $0.68 Preferred shares Options eTextbook and Media Calculate diluted earnings per share for 2023. (Round earnings per share to 2 decimal places, e.g. 15.25.) Basic Options Sub Total 4% bonds Sub Total 6% bonds Sub Total Diluted EPS $ $ Numerator Denominator $ EPS
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