Question
In 2015, Buraka Enterprises issued, at par, 75 1,000, 8% bonds, each convertible into 100 ordinary shares. The liability component of convertible bonds was 950
In 2015, Buraka Enterprises issued, at par, 75 1,000, 8% bonds, each convertible into 100 ordinary shares. The liability component of convertible bonds was 950 per bond, based on a market rate of interest of 10%. Buraka had revenues of 17,500 and expenses other than interest and taxes of 8,400 for 2016. (Assume that the tax rate is 40%.) Throughout 2016, 2,000 ordinary shares were outstanding; none of the bonds was converted or redeemed.
Instructions
(a) Compute diluted earnings per share for 2016.
(b) Assume the same facts as those assumed for part (a), except that the 75 bonds were issued on September 1, 2016 (rather than in 2015), and none have been converted or redeemed.
(c) Assume the same facts as assumed for part (a), except that 25 of the 75 bonds were actually converted on July 1, 2016.
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