Question
WildhorseCorporation is preparing earnings per share data for 2020. The net income for the year ended December 31, 2020 was $410,000 and there were 59,700
WildhorseCorporation is preparing earnings per share data for 2020. The net income for the year ended December 31, 2020 was $410,000 and there were 59,700 common shares outstanding during the entire year. Wildhorse has the following two convertible securities outstanding:
10% convertible bonds (each $1,000 bond is convertible into 20 common shares) | $100,000 | |
3% convertible $100 par value preferred shares (each share is convertible into 2 common shares) | $53,000 |
Both convertible securities were issued at face value in 2017. There were no conversions during 2020, and Wildhorses 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.
Calculate the income effect of the dividends on preferred shares.
Dividends on preferred shares $__________ Calculate Wildhorses basic earnings per share for 2020. (Round answer to 2 decimal places, e.g. 15.25.)
Basic earnings per share $______
Calculate the after tax interest paid on the 10% bonds
After tax interest $________
Determine an incremental per share effect for each potentially dilutive security. (Round earnings per share to 2 decimal places, e.g. 15.25.)
Potentially dilutive security | Incremental Numerator Effect | Incremental Denominator Effect | EPS | |||
---|---|---|---|---|---|---|
Bonds 10% | $enter a dollar amount | $enter a dollar amount | $enter a dollar amount rounded to 2 decimal places |
eTextbook and Media
Incorrect answer iconYour answer is incorrect.
Determine an incremental per share effect for each potentially dilutive security. (Round earnings per share to 2 decimal places, e.g. 15.25.)
Potentially dilutive security | Incremental Numerator Effect | Incremental Denominator Effect | EPS | |||
---|---|---|---|---|---|---|
3% Preferred shares | $enter a dollar amount | $enter a dollar amount | $enter a dollar amount rounded to 2 decimal places |
alculate Wildhorses diluted earnings per share for 2020. (Round earnings per share to 2 decimal places, e.g. 15.25.)
Numerator | Denominator | EPS | |||||
---|---|---|---|---|---|---|---|
Basic | $enter a dollar amount | enter a dollar amount | $enter a dollar amount rounded to 2 decimal places | ||||
select an itemPreferred sharesBonds Preferred sharesBonds | enter a dollar amount | enter a dollar amount | |||||
Sub Total | enter a subtotal of the two previous amounts | enter a subtotal of the two previous amounts | enter a dollar amount rounded to 2 decimal places | ||||
select an itemBondsPreferred shares Preferred sharesBonds | enter a dollar amount | enter a dollar amount | |||||
$enter a total amount | enter a total amount | $enter a dollar amount rounded to 2 decimal places |
eTextbook and Media
Part 8
Incorrect answer iconYour answer is incorrect.
Recalculate Wildhorses basic and diluted earnings per share for 2020, assuming instead that the preferred shares pay a 15% dividend. Calculate the income effect of the dividends on preferred shares.
Dividends on preferred shares | $enter the Dividends on preferred shares in dollars |
eTextbook and Media
Part 9
Incorrect answer iconYour answer is incorrect.
Calculate Wildhorse's basic earnings per share for 2020. (Round answer to 2 decimal places, e.g. 15.25.)
Basic earnings per share | $enter Basic earnings per share in dollars rounded to 2 decimal places |
Determine an incremental per share effect for the 15% preferred shares. (Round earnings per share to 2 decimal places, e.g. 15.25.)
Potentially dilutive security | Incremental Numerator Effect | Incremental Denominator Effect | EPS | |||
---|---|---|---|---|---|---|
15% Preferred shares | $enter a dollar amount | $enter a dollar amount | $enter a dollar amount rounded to 2 decimal places |
The 15% shares are select an option anti-dilutivedilutive .
eTextbook and Media
Incorrect answer iconYour answer is incorrect.
Calculate Wildhorse's dilutive earnings per share for 2020. (Round answer to 2 decimal places, e.g. 15.25.)
Diluted earnings per share | $enter Diluted earnings per share in dollars rounded to 2 decimal places |
|
|
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