1.
Bonds: Bonds are long-term promissory notes that are represented by a company while borrowing money from investors to raise fund for financing the operations.
Common stock: It refers to a security issued in a form of certificate and implies the right of ownership of an investor over a portion of company’s earnings and assets.
Earnings per Share: It is a portion of profit that is earned by each common stock.
Formula:
To Determine: Earnings per share of common stock for each plan, if income before bond interest and income tax is $10,000,000.
2.
Earnings per share of common stock for each plan, if income before bond interest and income tax is $6,000,000.
3.
To Describe: The advantages and disadvantages of each plans.
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Working Papers, Volume 1, Chapters 1-15 for Warren/Reeve/Duchac's Corporate Financial Accounting, 13th + Financial & Managerial Accounting, 13th
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