On January 1, 2015, Lund Company issued 10-year, €3,000,000 face value, 6% bonds, at par. Each €1,000 bond is convertible into 20 ordinary shares of Lund. Lund's net income in 2016 was €240,000, and its tax rate was 40%. Interest expense on the liability component in 2016 was €210,000. The company had 100,000 ordinary shares outstanding throughout 2015. None of the bonds were converted in 2015. 1. Compute diluted earnings per share for 2015. (Round answer to 2 decimal places, e.g. 5.25.) 2. Compute diluted earnings per share for 2015, assuming the same facts as above, except that €1,000,000 of 6% convertible preference shares were issued instead of the bonds. Each €100 preference share is convertible into 5 ordinary shares of Lund.

On January 1, 2015, Lund Company issued 10-year, €3,000,000 face value, 6% bonds, at par. Each €1,000 bond is convertible into 20 ordinary shares of Lund. Lund's net income in 2016 was €240,000, and its tax rate was 40%. Interest expense on the liability component in 2016 was €210,000. The company had 100,000 ordinary shares outstanding throughout 2015. None of the bonds were converted in 2015. 1. Compute diluted earnings per share for 2015. (Round answer to 2 decimal places, e.g. 5.25.) 2. Compute diluted earnings per share for 2015, assuming the same facts as above, except that €1,000,000 of 6% convertible preference shares were issued instead of the bonds. Each €100 preference share is convertible into 5 ordinary shares of Lund.

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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Question

On January 1, 2015, Lund Company issued
10-year, €3,000,000 face value, 6% bonds, at
par. Each €1,000 bond is convertible into 20
ordinary shares of Lund. Lund's net income in
2016 was €240,000, and its tax rate was 40%.
Interest expense on the liability component in
2016 was €210,000. The company had
100,000 ordinary shares outstanding
throughout 2015. None of the bonds were
converted in 2015.
1. Compute diluted earnings per share for
2015. (Round answer to 2 decimal places, e.g.
5.25.)
2. Compute diluted earnings per share for
2015, assuming the same facts as above,
except that €1,000,000 of 6% convertible
preference shares were issued instead of the
bonds. Each €100 preference share is
convertible into 5 ordinary shares of Lund.

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