Happi Man Inc. had 220,000 ordinary shares outstanding in all of 2022. On January 1, 2020, Happi issued at par $400,000 in 10% bonds maturing on January 1, 2028. Each $1,000 bond is convertible into 9 ordinary shares. Assume that the effective interest rate is 10%. There are 5,000 outstanding cumulative preferred shares that are each entitled to an annual dividend of $0.20. Each preferred share is convertible into three ordinary shares. Dividends were not declared or paid during 2022. Happi's net income for the year ended December 31, 2022, was $250,000. Its income tax rate was 35%. Required: Calculate Happi's basic EPS for 2022. Are the convertible bonds dilutive or anti-dilutive in nature? The convertible preferred shares dilutive or anti-dilutive in nature?? Calculate Happi's diluted EPS for 2022.
Happi Man Inc. had 220,000 ordinary shares outstanding in all of 2022. On January 1, 2020, Happi issued at par $400,000 in 10% bonds maturing on January 1, 2028. Each $1,000 bond is convertible into 9 ordinary shares. Assume that the effective interest rate is 10%. There are 5,000 outstanding cumulative preferred shares that are each entitled to an annual dividend of $0.20. Each preferred share is convertible into three ordinary shares. Dividends were not declared or paid during 2022. Happi's net income for the year ended December 31, 2022, was $250,000. Its income tax rate was 35%. Required: Calculate Happi's basic EPS for 2022. Are the convertible bonds dilutive or anti-dilutive in nature? The convertible preferred shares dilutive or anti-dilutive in nature?? Calculate Happi's diluted EPS for 2022.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Happi Man Inc. had 220,000 ordinary shares outstanding in all of 2022.
- On January 1, 2020, Happi issued at par $400,000 in 10% bonds maturing on January 1, 2028. Each $1,000 bond is convertible into 9 ordinary shares. Assume that the effective interest rate is 10%.
- There are 5,000 outstanding cumulative preferred shares that are each entitled to an annual dividend of $0.20. Each
preferred share is convertible into three ordinary shares. - Dividends were not declared or paid during 2022.
- Happi's net income for the year ended December 31, 2022, was $250,000. Its income tax rate was 35%.
Required:
- Calculate Happi's basic EPS for 2022.
- Are the convertible bonds dilutive or anti-dilutive in nature?
- The convertible preferred shares dilutive or anti-dilutive in nature??
- Calculate Happi's diluted EPS for 2022.
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