Answered: Required a. Is this a simple or a…

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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Calculating EPS and Multiple Securities

At the end of 2020, the records of Wolverine Corporation reflected the following.

Common stock, $10 par; authorized 180,000 shares: issued and outstanding throughout the year,
90,000 shares			$900,000
Preferred stock, $50 par, 7%, cumulative, convertible into common stock, share for share;
authorized, 18,000 shares; issued and outstanding throughout year, 3,600 shares			180,000
Contributed capital in excess of par, common stock			144,000
Retained earnings (no dividends declared during the year)			846,000
Bonds payable, 10% nonconvertible, issued at par in 2016			270,000
Net income			240,000
Stock options outstanding (all year for 18,000 shares of common stock at $15 per share)
Income tax rate, 25%
Average market price of the common stock during 2020, $25 per share

Required

a. Is this a simple or a complex capital structure?

b. Compute the required EPS amounts.

Note: Round earnings per share amounts to two decimal places.
Note: If an amount is not required, leave the answer blank (zero).

**Calculating EPS and Multiple Securities**

At the end of 2020, the records of Wolverine Corporation reflected the following.

- **Common stock**, $10 par; authorized 180,000 shares: issued and outstanding throughout the year, 90,000 shares: $900,000
- **Preferred stock**, $50 par, 7%, cumulative, convertible into common stock, share for share; authorized, 18,000 shares; issued and outstanding throughout the year, 3,600 shares: 180,000
- **Contributed capital in excess of par**, common stock: 144,000
- **Retained earnings** (no dividends declared during the year): 846,000
- **Bonds payable**, 10% nonconvertible, issued at par in 2016: 270,000
- **Net income**: 240,000
- **Stock options outstanding** (all year for 18,000 shares of common stock at $15 per share)
- **Income tax rate**: 25%
- **Average market price of the common stock during 2020**: $25 per share

**Required**

a. Is this a simple or a complex capital structure? [Dropdown selection required: Simple/Complex]

b. Compute the required EPS amounts.

- **Note**: Round earnings per share amounts to two decimal places.
- **Note**: If an amount is not required, leave the answer blank (zero).

| Net Income Available to Common Stockholders | Weighted Avg. Common Shares Outstanding | Per Share |
|---------------------------------------------|-----------------------------------------|-----------|
| Basic EPS | | |
| Diluted EPS | | |

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