Exercise 10-15 (Algo) Effect of Convertible Bonds on Earnings per Share LO 10-4 Poppy Corporation owns 60 percent of Seed Company's common shares. Balance sheet data for the companies on December 31, 20X2, are as follows: Assets Cash Accounts Receivable Inventory Buildings and Equipment Less: Accumulated Depreciation Investment in Seed Company Stock Total Assets Liabilities and Owners' Equity Accounts Payable Bonds Payable Common Stock ($10 par value) Retained Earnings Seed Poppy Corporation Company $ 74,000 250,000 300,000 220,000 Total Liabilities and Owners' Equity $ 844,000 $ 32,000 55,000 $ 91,000 82,000 111,000 100,000 660,000 92,000 (235,000) (72,000) 135,000 $ 844,000 Basic earnings per share Diluted earnings per share $ 487,000 $ 62,000 200,000 100,000 125,000 $ 487,000 The bonds of Poppy Corporation and Seed Company pay annual interest of 8 percent and 10 percent, respectively. Poppy's bonds are not convertible. Seed's bonds can be converted into 10,000 shares of its company stock any time after January 1, 20X1. An Income tax rate of 40 percent is applicable to both companies. Seed reports net income of $32,000 for 20X2 and pays dividends of $11,000. Poppy reports Income from its separate operations of $50,000 and pays dividends of $26,000. Required: Compute basic and diluted EPS for the consolidated entity for 20x2. Note: Round your answers to 2 decimal places.
Exercise 10-15 (Algo) Effect of Convertible Bonds on Earnings per Share LO 10-4 Poppy Corporation owns 60 percent of Seed Company's common shares. Balance sheet data for the companies on December 31, 20X2, are as follows: Assets Cash Accounts Receivable Inventory Buildings and Equipment Less: Accumulated Depreciation Investment in Seed Company Stock Total Assets Liabilities and Owners' Equity Accounts Payable Bonds Payable Common Stock ($10 par value) Retained Earnings Seed Poppy Corporation Company $ 74,000 250,000 300,000 220,000 Total Liabilities and Owners' Equity $ 844,000 $ 32,000 55,000 $ 91,000 82,000 111,000 100,000 660,000 92,000 (235,000) (72,000) 135,000 $ 844,000 Basic earnings per share Diluted earnings per share $ 487,000 $ 62,000 200,000 100,000 125,000 $ 487,000 The bonds of Poppy Corporation and Seed Company pay annual interest of 8 percent and 10 percent, respectively. Poppy's bonds are not convertible. Seed's bonds can be converted into 10,000 shares of its company stock any time after January 1, 20X1. An Income tax rate of 40 percent is applicable to both companies. Seed reports net income of $32,000 for 20X2 and pays dividends of $11,000. Poppy reports Income from its separate operations of $50,000 and pays dividends of $26,000. Required: Compute basic and diluted EPS for the consolidated entity for 20x2. Note: Round your answers to 2 decimal places.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Transcribed Image Text:Exercise 10-15 (Algo) Effect of Convertible Bonds on Earnings per Share LO 10-4
Poppy Corporation owns 60 percent of Seed Company's common shares. Balance sheet data for the
companies on December 31, 20X2, are as follows:
Assets
Cash
Accounts Receivable
Inventory
Buildings and Equipment
Less: Accumulated Depreciation
Investment in Seed Company Stock
Total Assets
Liabilities and Owners' Equity
Accounts Payable
Bonds Payable
Common Stock ($10 par value)
Retained Earnings
Total Liabilities and Owners' Equity
Poppy
Corporation
Basic earnings per share
Diluted earnings per share
Seed
Company
$ 74,000
250,000
300,000
220,000
$ 844,000
$
32,000
55,000
$ 91,000
82,000
111,000
100,000
660,000
92,000
(235,000) (72,000)
135,000
$ 844,000
$
487,000
$ 62,000
200,000
100,000
125,000
$
487,000
The bonds of Poppy Corporation and Seed Company pay annual interest of 8 percent and 10 percent,
respectively. Poppy's bonds are not convertible. Seed's bonds can be converted into 10,000 shares of its
company stock any time after January 1, 20X1. An income tax rate of 40 percent is applicable to both
companies. Seed reports net income of $32,000 for 20X2 and pays dividends of $11,000. Poppy reports
income from its separate operations of $50,000 and pays dividends of $26,000.
Required:
Compute basic and diluted EPS for the consolidated entity for 20X2.
Note: Round your answers to 2 decimal places.
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