Question
Carla VistaCorporation is preparing earnings per share data for 2020. The net income for the year ended December 31, 2020 was $ 395,000 and there
Carla VistaCorporation is preparing earnings per share data for 2020. The net income for the year ended December 31, 2020 was $ 395,000 and there were 59,700 common shares outstanding during the entire year. Carla Vista has the following two convertible securities outstanding:
10% convertible bonds (each $ 1,000 bond is convertible into 25 common shares) $ 114,000 4% convertible $ 100 par value preferred shares (each share is convertible into 2 common shares) $ 47,000
Both convertible securities were issued at face value in 2017. There were no conversions during 2020, and Carla Vistas income tax rate is 23%. 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 |
Calculate Carla Vistas 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 |
Calculate the after-tax interest paid on the 10% bonds.
After-tax interest
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 security | Incremental Numerator Effect | Incremental Denominator Effect | EPS | |||
---|---|---|---|---|---|---|
Bonds 10% | $ enter a dollar amount | $ |
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 security | Incremental Numerator Effect | Incremental Denominator Effect | EPS | |||
---|---|---|---|---|---|---|
4% Preferred shares | $ enter a dollar amount | $ enter a dollar amount | $ enter a dollar amount rounded to 2 decimal places |
eTextbook and Media
Rank the potentially dilutive securities from most dilutive to least dilutive.
Rank 1 | select an option 4% Preferred shares10% Bonds | |
---|---|---|
Rank 2 | select an option 4% Preferred shares10% Bonds |
Calculate Carla Vistas diluted earnings per share for 2020. (Round earnings per share to 2 decimal places, e.g. 15.25.)
Numerator | Denominator | EPS | |||||
---|---|---|---|---|---|---|---|
Basic | $ enter a dollar amount | enter a dollar amount | $ enter a dollar amount rounded to 2 decimal places | ||||
select an item Preferred sharesBonds | 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 sharesBonds | 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 |
eTextbook and Media
Recalculate Carla Vistas basic and diluted earnings per share for 2020, assuming instead that the preferred shares pay a 14% dividend. Calculate the income effect of the dividends on preferred shares.
Dividends on preferred shares | $ enter the Dividends on preferred shares in dollars |
Calculate Carla 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 |
Determine an incremental per share effect for the 14% preferred shares. (Round earnings per share to 2 decimal places, e.g. 15.25.)
Potentially dilutive security | Incremental Numerator Effect | Incremental Denominator Effect | EPS | |||
---|---|---|---|---|---|---|
14% Preferred shares | $ enter a dollar amount | $ enter a dollar amount | $ enter a dollar amount rounded to 2 decimal places |
The 14% shares are select an option
Calculate Carla Vista's dilutive earnings per share for 2020. (Round answer to 2 decimal places, e.g. 15.25.)
Diluted earnings per shar |
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