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.

FINANCIAL ACCOUNTING
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Author:Libby
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Chapter1: Financial Statements And Business Decisions
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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:

  1. Calculate Happi's basic EPS for 2022.
  2. Are the convertible bonds dilutive or anti-dilutive in nature?
  3. The convertible preferred shares dilutive or anti-dilutive in nature??
  4. Calculate Happi's diluted EPS for 2022.
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