Question
Kingbird Corporation reported Long-Term Liabilities and Shareholder's Equity in its December 31, 2023 Balance Sheet as follows: All of the above reported bonds payable, preferred
Kingbird Corporation reported Long-Term Liabilities and Shareholder's Equity in its December 31, 2023 Balance Sheet as follows:
All of the above reported bonds payable, preferred stock and common stock were outstanding throughout the entirety of fiscal 2023. no transactions involving bonds payable, preferred stock or common stock occurred during fiscal 2023, except for interest on bonds payable. The bonds payable were all issued and sold at par.
Kingbird also had Class B common stock options to purchase 260,000 common shares at $8.00 per share outstanding throughout fiscal 2023. No stock options were exercised during fiscal 2023.
The fair market value of Kingbird's common shares was $12.00 per share throughout the entirety of fiscal 2023. Kingbird's income tax rate is 30%.
The weighted average of common shares outstanding for 2023 was 4,900,000 common shares, and Kingbird earned net income of $24,487,000.
a) Calculate the after-tax interest paid on the 9% bonds
b) Determine an incremental per share effect for the 9% bonds
c) Calculate the after-tax interest paid on the Class A Preferred Shares
d) Determine an incremental per share effect for the Class B Preferred Shares
e) Calculate the after-tax interest paid on the Class B Preferred Shares
f) Determine an incremental per share effect for the Class B Preferred Shares
Long Term Liabilities: Bonds Payable $7,100,0 14% interest, convertible to 20 common shares/ $1,000 bond Bonds Payable $5,000,0 9% interest, convertible to 35 common shares /$1,000 bond Shareholders' Equity: Class A Preferred shares $5,300,0 $4.50 cumulative preferred share convertible into 9 common shares, 106,000 authorized, issued and outstanding Class B Common shares $29,400,0 Unlimited number authorized 4,900,000 issued and outstandingStep by Step Solution
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