Convertible Preferred Stock, Convertible Bonds, and EPS

Francis Company has 12,000 shares of common stock outstanding at the beginning of 2013. Francis issued 1,500 additional shares on May 1 and 1,000 addtional shares on September 30. It also has two convertible securities outstanding at the end of 2013. These are:

1. Convertible Preferred Stock: 1,250 of 8.5% $50 par, preferred stock were issued on January 2, 2010, for $55 per share. Each share of perferred stock is convertible into 3 shares of common stock. Current dividends has been declared and paid. To date, no preferred stock has been converted.

2. Convertible bonds: Bonds with a face value of 125,000 and an interest rate of 5.5% were issued at par in 2012. Each $1,000 bond is convertible into 20 shares of common stock. To date, no bonds have been converted.

Francis enrned net income $50,000 during 2013. The income tax rate is 30%.

1. Compute the number of shares of common stock that Francis should use in calcalating basic earning per shares for 2013.

Weighted average shares outstanding shares

2. Calculate basic earning per share for 2013. If required, round your answer to the nearest cent. Basic earning per share:

Calculate diluted earning per share for 2013 and the incremental EPS of the preferred stock and convertible bonds. If required, round your answers to the nearest cent.

Diluted earning per share:

Incremental earnings per share

Bonds:

preferred:

4. Assume the same facts as the above except that net income included as loss from discontiuned operations of 19,500 net of income taxes. Compute basic EPS. You do not have to calculate diluted EPS for this case. If required, round your answer to the nearest cent.

Basic earning per share:

4b. Show how basic EPS you calculated should be reported to shareholders. You do not have to calculate diluted earning per share:

Income from continued operations

Lost from discontinuted operations

Net income