Pendulum Toys Corp. (PTC) was incorporated on January 1, 2018. At that time, it issued 50,000 ordinary

Question:

Pendulum Toys Corp. (PTC) was incorporated on January 1, 2018. At that time, it issued 50,000 ordinary shares; 5,000, $100, 5% cumulative preferred shares “A”; and 30,000, $100, 6% noncumulative preferred shares “B.” Dividends were not declared or paid during 2018. PTC also issued at par $500,000 in 7% bonds maturing on January 1, 2021. Each $1,000 bond is convertible into 30 ordinary shares. Assume that the effective interest rate is 7%. PTC’s net income (loss) for the year ended December 31, 2018, was ($400,000). Its income tax rate was 25%. 


Required:

a. Calculate PTC’s basic EPS for 2018. 

b. Are the convertible bonds dilutive or antidilutive in nature? Why? 

c. Calculate PTC’s diluted EPS for 2018.

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question
Question Posted: