The following information relates to the December 31, 2014, balance sheet for Chiapucci Incorporated. 6% convertible 10-year

Question:

The following information relates to the December 31, 2014, balance sheet for Chiapucci Incorporated.

6% convertible 10-year debentures issued at par . . . . . . . . . . . . . . . . . . . . . . . $1,000,000

Common stock, $12 par, 110,000 shares issued and outstanding . . . . . . . . . . $1,320,000

Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 842,000

Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,162,000

The convertible debentures include terms stating that each $1,000 bond can be converted into 30 shares of common stock.

The following events occurred during 2015.

(a) On August 31, 2015, the complete issue of convertible debentures was converted into common stock.

(b) Chiapucci reported net income of $540,000 in 2015. The company's income tax rate was 30%.

Instructions:

1. Compute basic and diluted EPS for the year ended December 31, 2015.

2. Assume that Chiapucci had a net loss of $220,000. Show why the convertible debentures are Antidilutive under loss conditions.

Debentures
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Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...