1. Consider the following facts: - Company A has three types of convertible securities in its capital structure: 1. 10% convertible preferred stock with dividends of $7,000 declared during the year and shares convertible into 2,500 common shares. 2. 6% convertible bonds with interest expense (net of taxes) of $8,000 and convertible into 3,500 common shares. 3. 8% convertible bonds with interest expense (net of taxes) of $5,000 and convertible into 1,600 common shares. Which of the convertible securities listed would be the least dilutive on earnings per share?

Convertible security #1

Convertible securities #3 and #2 will be equally dilutive on earnings per share.

Convertible security #2

All the convertible securities listed will be equally dilutive on earnings per share.

Convertible security #3

2. A company would like to encourage its convertible bondholders to exercise their conversion privileges. Therefore, the company will offer the bondholders something called a(an):

additional conversion

end conversion

none of these are correct

sweetner

forced conversion

3. Consider the following facts: - Company A purchased bonds with accrued interest on August 1, 2015. - 800 bonds were purchased and each bond has a par value of $1,000. - The bonds were purchased at 97 and have a coupon rate of 9%. - The bonds were dated May 1, 2015 and have a maturity date of April 30, 2021. - Interest is paid semiannually on the bonds on October 31 and April 30. - Company A will include the bonds in its available-for-sale portfolio. On August 1, 2015, Company A should record an entry for the purchase of the bonds. The entry should include a credit to Cash for $ ___________.