Kingston Corporation has basic earnings per common share of $1.54 for the year ended December 31, 2013.

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Kingston Corporation has basic earnings per common share of $1.54 for the year ended December 31, 2013. For each of the following independent examples, decide whether the convertible security would be dilutive or antidilutive in computing diluted EPS. Consider each example individually. The tax rate is 35%.
(a) 7 1/2% debentures, $500,000 face value are convertible into common stock at the rate of 25 shares for each $1,000 bond.
(b) $6 preferred stock (no par) is convertible into common stock at the rate of three shares of common stock for one share of preferred stock. There are 30,000 shares of preferred stock outstanding.
(c) Options to purchase 150,000 shares of common stock are outstanding. The exercise price is $22 per share; average market price is $27 per share.
(d) $800,000 of 11% debentures are convertible at the rate of 25 shares of common stock for each $1,000 bond.
(e) Preferred 7% stock, $100 par, 10,000 shares outstanding is convertible into 5 shares of common stock for each share of preferred stock.
Debentures
Debenture DefinitionDebentures are corporate loan instruments secured against the promise by the issuer to pay interest and principal. The holder of the debenture is promised to be paid a periodic interest and principal at the term. Companies who...
Common Stock
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...
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the...
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Intermediate Accounting

ISBN: 978-0538479738

18th edition

Authors: Earl K. Stice, James D. Stice

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