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- Tama Companys capital structure consists of common stock and convertible bonds. At the beginning of 2019, Tama had 15,000 shares of common stock outstanding; an additional 4,500 shares were issued on May 4. The 7% convertible bonds have a face value of 80,000 and were issued in 2016 at par. Each 1,000 bond is convertible into 25 shares of common stock; to date, none of the bonds have been converted. During 2019, the company earned net income of 79,200 and was subject to an income tax rate of 30%. Required: Compute the 2019 diluted earnings per share.On July 2, 2018, McGraw Corporation issued 500,000 of convertible bonds. Each 1,000 bond could be converted into 20 shares of the companys 5 par value stock. On July 3, 2020, when the bonds had an unamortized discount of 7,400 and the market value of the McGraw shares was 52 per share, all the bonds were converted into common stock. Required: 1. Prepare the journal entry to record the conversion of the bonds under (a) the book value method and (b) the market value method. 2. Compute the companys debt-to-equity ratio (total liabilities divided by total shareholders equity, as described in Chapter 6) under each alternative. Assume the companys other liabilities are 2 million and shareholders equity before the conversion is 3 million. 3. Assume the company uses IFRS and issued the bonds for 487,500 on July 2, 2018. On this date, it determined that the fair value of each bond was 930 and the fair value of the conversion option was 45 per bond. Prepare the journal entry to record the issuance of the bonds.Waseca Company had 5 convertible securities outstanding during all of 2019. It paid the appropriate interest (and amortized any related premium or discount using the straight line method) and dividends on each security during 2019. Each of the convertible securities is described in the following table: Additional data: Net income for 2019 totaled 119,460. The weighted average number of common shares outstanding during 2019 was 40,000 shares. No share options or warrants arc outstanding. The effective corporate income tax rate is 30%. Required: 1. Prepare a schedule that lists the impact of the assumed conversion of each convertible security on diluted earnings per share. 2. Prepare a ranking of the order in which each of the convertible securities should be included in diluted earnings per share. 3. Compute basic earnings per share. 4. Compute diluted earnings per share. 5. Indicate the amount(s) of the earnings per share that Waseca would report on its 2019 income statement.
- On January 01, 2022, DEF Company provided the following information: Ordinary share capital, P50, 150,000 shares 7,500,000 10% bonds payable, each P1,000 is convertible into 20 ordinary shares 6,000,000 On June 30, bonds with face amount of P3,000,000 were actually converted into ordinary shares. The net income for the current year was P2,115,000 and the income tax rate is 30%. Diluted EPSa. 10.13b. 12.15c. 9.00d. 11.57On January 1, 2022, Shamrock SA issued 10-year, €1,870,000 face value, 6% bonds, at par. Each €1,000 bond is convertible into 15 ordinary shares of Shamrock. Shamrock's net income in 2023 was €462,800, and its tax rate was 40%. Interest expense on the liability component in 2023 was €130,900. The company had 104,000 ordinary shares outstanding throughout 2022. None of the bonds were converted in 2022. (a) Compute diluted earnings per share for 2022. (Round answer to 2 decimal places, e.g. 2.55.) Diluted earnings per share € (b) Compute diluted earnings per share for 2022, assuming the same facts as above, except that €1,040,000 of 6% convertible preference shares were issued instead of the bonds. Each €100 preference share is convertible into 5 ordinary shares of Shamrock. (Round answer to 2 decimal places, eg. 2.55.) Diluted earnings per share €On January 1, 2025, Nash Company issued 10-year, $1,810,000 face value, 6% bonds, at par. Each $1,000 bond is convertible into 15 shares of Nash common stock. Nash's net income in 2025 was $403,200, and its tax rate was 20%. The company had 96,000 shares of common stock outstanding throughout 2025. None of the bonds were converted in 2025. a. Compute diluted earnings per share for 2025. (Round answer to 2 decimal places, e.g. 2.55.) Diluted earnings per share $ b. Compute diluted earnings per share for 2025, assuming the same facts as above, except that $960,000 of 6% convertible preferred stock was issued instead of the bonds. Each $100 preferred share is convertible into 5 shares of Nash common stock. (Round answer to 2 decimal places, e.g. 2.55.) Diluted earnings per share
- On April 1, 2021, River Company issued P2,000,000 12% bonds at face amount. Each P1,000 bond is convertible into 10 ordinary shares. The entity reported net income of P2,749,000 for the year ´ended December 31, 2021. The average number of ordinary shares outstanding was 100,000 shares and the income tax rate is 30%. Required: 1. Basic earnings per share 2. Diluted earnings per share.Fortuner Company had 200,000 ordinary shares outstanding on January 1, 2021. On January 1, 2021, the entity issued 4,000 convertible 10% bonds with P1,000 face value. The bonds were converted on October 1, 2021 and 40 ordinary shares were issued in exchange for each bond. Net income was P5,000,000. The income tax rate is 30%. What is the amount of basic earnings per share? 25.00 13.80 20.83 15.62 What is the amount of diluted earnings per share? 14.47 21.65 14.72 14.61On January 1, 2025, Novak Company issued 10-year, $2,150,000 face value, 6% bonds, at par. Each $1,000 bond is convertible into 16 shares of Novak common stock. Novak's net income in 2025 was $518,950, and its tax rate was 20%. The company had 97,000 shares of common stock outstanding throughout 2025. None of the bonds were converted in 2025. a. Compute diluted earnings per share for 2025. (Round answer to 2 decimal places, e.g. 2.55.) Diluted earnings per share $ b. Compute diluted earnings per share for 2025, assuming the same facts as above, except that $970,000 of 6% convertible preferred stock was issued instead of the bonds. Each $100 preferred share is convertible into 5 shares of Novak common stock. (Round answer to 2 decimal places, e.g. 2.55.) Diluted earnings per share $
- On January 1, 2021, Simple Company provided the following information. Ordinary share capital, P100, 100,000 shares 12% bonds payable issued at face amount, each P1,000 bond is convertible into 20 ordinary shares 10,000,000 4,000,000 On April 1, 2021, bonds with face amount of P3,000,000 were actually converted into ordinary share. The net income for the current year was P2,320,000 and the income tax rate is 30%. Required: 1. Basic earnings per share 2. Diluted earnings per shareGHJ, a listed entity, has 1,000,000 ordinary shares in issue throughout 2019. The profits after tax for the period total N$800,000. The entity has two convertible financial instruments in issue: N$500,000 10% loan stock, each N$1,000 of stock having the right to convert into 2,000 ordinary shares. 400,000 convertible N$1 non-equity shares, paying a dividend of 10 cents per share. Each preference share is convertible to 2 ordinary shares. Requirement Calculate the basic and diluted earnings per share for GHJ assuming a tax rate of 30%. (b) ACD, another listed entity, has earnings per share in 2018 of 25 cents per share. ACD has 4,000,000 ordinary shares in issue throughout 2018. In 2019 1,500,000 ordinary shares were issued by way of a capitalisation (bonus) issue. N$1,200,000. Requirement Calculate the EPS for 2019 and the restated eps for 2018 that will be included in the 2019 financial statements. The profits after tax for the year wereOn January 1, 2025, Sheridan Company issued 10-year, $1,920,000 face value, 6% bonds, at par. Each $1,000 bond is convertible into 14 shares of Sheridan common stock. Sheridan's net income in 2025 was $478,500, and its tax rate was 20%. The company had 110,000 shares of common stock outstanding throughout 2025. None of the bonds were converted in 2025. a. Compute diluted earnings per share for 2025. (Round answer to 2 decimal places, e.g. 2.55.) Diluted earnings per share $ b. Compute diluted earnings per share for 2025, assuming the same facts as above, except that $1,100,000 of 6% convertible preferred stock was issued instead of the bonds. Each $100 preferred share is convertible into 5 shares of Sheridan common stock. (Round answer to 2 decimal places, e.g. 2.55.) Diluted earnings per share $ tA 4.17 3.45