Richie Candy Corporation issued 20 year, $10,000,000 face value, 9 convertible debentures on January 1, 2011 The bonds have a par value of $1,000, with interest payable semiannually The initial conversion ratio is 10 1, and in 3 years, it will increase to 12 1 At the date of issue, the bonds were s...

a Net income for year 26860000 Add Adjustment for interest net of tax 525000 2738500 ...

Richie Candy Corporation issued 20-year, $10,000,000 face value, 9% convertible debentures on January 1, 2011. The bonds

Question:

Richie Candy issued 20-year, $10,000,000 face value, 9% convertible on January 1, 2011. The bonds have a of $1,000, with interest payable semiannually. The initial conversion ratio is 10:1, and in 3 years, it will increase to 12:1. At the date of issue, the bonds were sold at 105. Bond premium is amortized on a straight-line basis. Richie Candy’s effective tax was 40%. Net income in 2014 was $26,860,000, and the company had 12,800,000 common shares issued and outstanding during the entire year.

Instructions
(a) Prepare a schedule to compute both basic and diluted earnings per share.
(b) Discuss how the schedule would differ if the security was convertible 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... 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... Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...