Question
IvanhoeCorporation is preparing earnings per share data for 2020. The net income for the year ended December 31, 2020 was $405,000 and there were 58,700
IvanhoeCorporation is preparing earnings per share data for 2020. The net income for the year ended December 31, 2020 was $405,000 and there were 58,700 common shares outstanding during the entire year. Ivanhoe has the following two convertible securities outstanding:
10% convertible bonds (each $1,000 bond is convertible into 25 common shares) | $118,000 | |
4% convertible $100 par value preferred shares (each share is convertible into 2 common shares) | $55,000 |
Both convertible securities were issued at face value in 2017. There were no conversions during 2020, and Ivanhoes income tax rate is 22%. The preferred shares are cumulative. For simplicity, ignore the requirement to record the debt and equity components of the bonds separately.
a) Calculate the income effect of the dividends on preferred shares.
b) Calculate basic earnings per share. (For simplicity, ignore the requirement to record the debt and equity portions of the convertible bond separately.
c) Calculate the after-tax interest paid
d) Determine an incremental per share effect
e) Rank the potentially dilutive securities from most dilutive to least dilutive.
f) Calculate diluted earnings per share.
Numerator Denominator EPS $ $ $ Basic Sub Total Sub TotalStep by Step Solution
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