Chapter 13, Problem 12BE

RoseBud Motel Ltd. (RM) had 100,000 ordinary shares outstanding during all of 2025, all owned by the owner Johnny Rose. In 2023, RM issued $500,000, 3% non-cumulative preferred shares. Each $100 preferred share is convertible into one ordinary share. RM also had 6,000, $100 cumulative preferred shares outstanding that are each entitled to an annual dividend of $1.60. Each preferred share is convertible into two ordinary shares.  RM’s net income for the year ended December 31, 2025, was $400,000. Its income tax rate was 20%. The annual dividend was declared and paid during 2025 on the cumulative preferred shares but not on the non-cumulative shares.      Required  Calculate RM’s basic EPS for 2025.  Are the non-cumulative convertible preferred shares dilutive or antidilutive in nature? The cumulative convertible preferred shares? Support your answer with calculations.   Calculate RM’s diluted EPS for 2025.

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Hogwarts Inc. (HI) had 80,000 ordinary shares outstanding on January 1, 2025. Transactions throughout 2025 affecting its shareholdings follow.    February 1: HI issued 200,000, $10, cumulative 10% preferred shares. March 1: HI issued 40,000 ordinary shares. April l: HI declared and issued an 8% stock dividend on the ordinary shares. July 1: HI repurchased and cancelled 30,000 ordinary shares. October 1: HI declared and issued a 3-for-l stock split on the ordinary shares. December 31: HI declared $99,600 in dividends on the ordinary shares. Net income for the year ended December 31, 2025, was $600,000. Its tax rate was 40%.     Required  What was the weighted average number of ordinary shares outstanding in 2025?  What was the basic EPS in 2025?  If the preferred shares issued on February 1, 2025, were non-cumulative, what would basic EPS for 2025 have been?

Financial Accounting Question

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In the table below, choose the financial instrument to list on the left side that best explains the example on the right side. Types of financial instrument to select from: financial asset, financial liability, equity, compound instrument, basic option, swap, forward, future, warrant, put option, or call option.    Type of financial instrument  Example    A company contracts with an investment bank to pay the bank prime rate + 1% interest on $25 million of debt in exchange for receiving 5% from the bank.    Company Abacus issues $10 million debentures with warrants to purchase shares for $10/share within 8 years.    A company contracts to sell 100 barrels of oil at $110/barrel in March on the Chicago Mercantile Exchange.    Note payable    A company purchases the right but not the obligation to purchase 5,000 shares in another company at $15 each over a 12-year period.    Company X contracts to buy 1,000 oz of silver at $40/oz on March 15,…

General Accounting