Question
(EPS with Convertible Bonds) On June 1, 2012, Bluhm Company and Amanar Company merged to form Davenport Inc. A total of 800,000 shares were issued
(EPS with Convertible Bonds) On June 1, 2012, Bluhm Company and Amanar Company merged to form Davenport Inc. A total of 800,000 shares were issued to complete the merger. The corporation reports on a calendar year basis.
On April 1, 2014, the company issued an additional 600,000 shares of stock for cash. All 1,400,000 shares were outstanding on December 31, 2014.
Davenport Inc. also issued $600,000 of 20-year, 8% convertible bonds at par on July 1, 2014. Each $1,000 bond converts to 40 shares of common at any interest date. None of the bonds have been converted to date.
Davenport Inc is preparing its annual report for the fiscal year ending December 31, 2014, and will report earnings per share figures based upon a reported after-tax net income of $1,540,000. The tax rate is 40%.
Instructions
Determine the following for 2014.
(a) The number of shares to be used for calculating:
(1) Basic earnings per share.
(2) Diluted earnings per share.
(b) The earnings figures to be used for calculating:
(1) Basic earnings per share.
Diluted earnings per share(2)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started