Carla VistaCorporation is preparing earnings per share data for 2020. The net income for the year ended December 31, 2020 was $395,000and there were58,000common shares outstanding during the entire year.Carla Vistahas the following two convertible securities outstanding:

10% convertible bonds (each $1,000bond is convertible into20common shares)$111,0004% convertible $100par value preferred shares (each share is convertible into2common shares)$48,000

Both convertible securities were issued at face value in 2017. There were no conversions during 2020, andCarla Vista's income tax rate is22%. The preferred shares are cumulative. For simplicity, ignore the requirement to record the debt and equity components of the bonds separately.

Calculate the income effect of the dividends on preferred shares.

Dividends on preferred shares

$

enter the Dividends on preferred shares in dollars

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CalculateCarla Vista's basic earnings per share for 2020.(Round answer to 2 decimal places, e.g. 15.25.)

Basic earnings per share$

enter Basic earnings per share in dollars rounded to 2 decimal places

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Calculate the after-tax interest paid on the10% bonds.

After-tax interest

$

enter the After-tax interest in dollars

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Determine an incremental per share effect for each potentially dilutive security.(Round earnings per share to 2 decimal places, e.g. 15.25.)

Potentially dilutive securityIncremental

Numerator Effect

Incremental

Denominator Effect

EPSBonds10%$

enter a dollar amount

$

enter a dollar amount

$

enter a dollar amount rounded to 2 decimal places

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Determine an incremental per share effect for each potentially dilutive security.(Round earnings per share to 2 decimal places, e.g. 15.25.)

Potentially dilutive securityIncremental

Numerator Effect

Incremental

Denominator Effect

EPS4% Preferred shares

$

enter a dollar amount

$

enter a dollar amount

$

enter a dollar amount rounded to 2 decimal places

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Rank the potentially dilutive securities from most dilutive to least dilutive.

Rank 1select an option

4% Preferred shares

10% Bonds

Rank 2select an option

4% Preferred shares

10% Bonds

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CalculateCarla Vista's diluted earnings per share for 2020.(Round earnings per share to 2 decimal places, e.g. 15.25.)

NumeratorDenominatorEPSBasic$

enter a dollar amount

enter a dollar amount

$

enter a dollar amount rounded to 2 decimal places

select an item

Preferred shares

Bonds

enter a dollar amount

enter a dollar amount

Sub Total

enter a subtotal of the two previous amounts

enter a subtotal of the two previous amounts

enter a dollar amount rounded to 2 decimal places

select an item

Preferred shares

Bonds

enter a dollar amount

enter a dollar amount

$

enter a total amount

enter a total amount

$

enter a dollar amount rounded to 2 decimal places

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RecalculateCarla Vista's basic and diluted earnings per share for 2020, assuming instead that the preferred shares pay a14% dividend. Calculate the income effect of the dividends on preferred shares.

Dividends on preferred shares$

enter the Dividends on preferred shares in dollars

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CalculateCarla Vista's basic earnings per share for 2020.(Round answer to 2 decimal places, e.g. 15.25.)

Basic earnings per share$

enter Basic earnings per share in dollars rounded to 2 decimal places

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Determine an incremental per share effect for the14% preferred shares.(Round earnings per share to 2 decimal places, e.g. 15.25.)

Potentially dilutive securityIncremental

Numerator Effect

Incremental

Denominator Effect

EPS14% Preferred shares

$

enter a dollar amount

$

enter a dollar amount

$

enter a dollar amount rounded to 2 decimal places

The14% shares are

select an option

anti-dilutive

dilutive

.

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CalculateCarla Vista's dilutive earnings per share for 2020.(Round answer to 2 decimal places, e.g. 15.25.)

Diluted earnings per share$

enter Diluted earnings per share in dollars rounded to 2 decimal places