Question
During 2018, Valentine Co. had 5 convertible securities outstanding. All required interest was paid and premiums and discounts are amortized on a straight line basis.
During 2018, Valentine Co. had 5 convertible securities outstanding. All required interest was paid and premiums and discounts are amortized on a straight line basis. Dividends were declared and paid on preferred stocks.
- 10.2% bonds : $200,000 face value. Issued at par. Each $1,000 bond is convertible into28 shares of common stock.
- 12.0% bonds : $160,000 face value. Issued at 110. Premium being amortized over 20-Year life. Each $1,000 bond is convertible into 47 shares of common stock.
- Stock options : Valentine had 3,000 stock options outstanding at the end of 2018. These options have an exercise price of $18 dollars a share. The end of the year stock price was $27 and the average for the year was $25.
- 8.3% preferred stock : $120,000 par value. Issued at 108. Each $100 par preferred stock is convertible into 3.9 shares of common stock.
- 7.5% preferred stock: $180,000 par value. Issued at par. Each $100 par preferred stock is convertible into 6 shares of common stock.
Additional Info: Net income for 2018 was $119,460. The weighted average number of common shares outstanding during 2018 was 40,000 shares. No other options or warrants are outstanding. The effective corporate tax rate is 30%.
REQUIRED:
1. Compute basic EPS
2. Compute Diluted EPS
3. What would Valentine report for EPS on its 2018 income statement?
NOTE: Please show all work
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