Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Polygon Corporation is preparing earnings per share data for 2020. The net income for the year ended December 31, 2020, was $200,000 and there were

Polygon Corporation is preparing earnings per share data for 2020. The net income for the year ended December 31, 2020, was $200,000 and there were 30,000 common shares outstanding during the entire year. Polygon has the following two convertible securities outstanding: 10% convertible bonds (each $1,000 bond is convertible into 25 common shares) 5% convertible $100 par value preferred shares (each share is convertible into two common shares) $50,000 $25,000 Both convertible securities were issued at face value in 2017. There were no conversions during 2020 and Polygons income tax rate is 20%. The preferred shares are cumulative. For simplicity, ignore the requirement to record the debt and equity components of the bonds separately. Required: (a) Calculate Polygons basic earnings per share for 2020. Round to two decimal places (1.5 marks). (b) Calculate Polygons diluted earnings per share for 2020. Round to two decimal places. Follow the three-step process to arrive at your answers and show your work for all steps. Indicate whether each security is dilutive or anti-dilutive and rank from most dilutive to least dilutive (8.5 marks). (c) Following the same steps from part (b), calculate Polygons diluted earnings per share for 2020, assuming instead that the preferred shares pay a 15% dividend. Round to two decimal places (3 marks).

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

More Books

Students also viewed these Finance questions

Question

10-9 How have social technologies changed e-commerce?

Answered: 1 week ago