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The Stellar Corporation issued 10-year, $4,310,000 par, 7% callable convertible subordinated debentures on January 2, 2020. The bonds have a par value of $1,000, with interest payable annually. The current conversion ratio is 13:1, and in 2 years it will increase to 19:1. At the date of issue, the bonds were sold at 98. Bond discount is amortized on a straight-line basis. Stellar’s effective tax was 20%. Net income in 2020 was $7,900,000, and the company had 2,120,000 shares outstanding during the entire year. Compute both basic and diluted earnings per share.

The Stellar Corporation issued 10-year, $4,310,000 par, 7% callable convertible subordinated debentures on January 2, 2020. The bonds have a par value of $1,000, with interest payable annually. The current conversion ratio is 13:1, and in 2 years it will increase to 19:1. At the date of issue, the bonds were sold at 98. Bond discount is amortized on a straight-line basis. Stellar’s effective tax was 20%. Net income in 2020 was $7,900,000, and the company had 2,120,000 shares outstanding during the entire year. Compute both basic and diluted earnings per share.

FINANCIAL ACCOUNTING
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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The Stellar Corporation issued 10-year, $4,310,000 par, 7% callable convertible subordinated debentures on January 2, 2020. The bonds have a par value of $1,000, with interest payable annually. The current conversion ratio is 13:1, and in 2 years it will increase to 19:1. At the date of issue, the bonds were sold at 98. Bond discount is amortized on a straight-line basis. Stellar’s effective tax was 20%. Net income in 2020 was $7,900,000, and the company had 2,120,000 shares outstanding during the entire year.

Compute both basic and diluted earnings per share.

 

Basic earnings per share  
$ 
Diluted earnings per share  
$ 
 
 
 
 
 
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