Curse of the Bambino Entertainment (CotBE) had the following securities outstanding and other information for 2017:

Preferred Stock :

Issue A Preferred Stock, cumulative and nonconvertible, 5%, $100 par: $1,000,000

Dividend payments are in arrears for three (3) years.

Issue B Preferred Stock, non-cumulative and convertible, 6%, $100 par: $4,000,000

Conversion rate is 4 common shares for every preferred share.

Common Stock:

Class A Common Stock, $1 par, 5,000,000 shares authorized, 1,000,000 shares

issued and outstanding at January 1, 2017 $1,000,000

Repurchased 120,000 shares on March 1, 2017
Repurchased 60,000 shares on July 1, 2017
Sold 100,000 of repurchased (treasury) shares on September 1, 2017

Stock Warrants - warrants are exchangeable for 100,000 common shares. The warrants were issued on October 1, 2016 and have a $15 exercise price per warrant. The average market price per share during 2017 was $20.

Stock Options – CotBE’s issued 100,000 stock options to key executives on January 1, 2017 which vest on December 31, 2019 and have an exercise price of $16 per option.

Convertible Bonds - 8% Convertible Bonds of $5,000,000 were sold at face value on July 1, 2017. Each $1,000 of bond is convertible into 120 shares of common stock.

Other Information:

- Net Income for 2017 was $1,700,000

- Income Tax Rate was 40% for 2017

- CotBE’s declared and paid a cash dividend of $200,000 on common stock during 2017.

REQUIRED -

Calculate CotBE’s Basic and Diluted EPS for the year ended December 31, 2017, show all calculations .

Answer rating: 100% (QA)

Net income 1700000 Dividend on Issue A Preferred stock for for 3 years 1000000 x 5 x 3 150000 Divide... View the full answer