Convertible Preferred Stock, Convertible Bonds, and EPS

Francis Company has $16,800$ shares of common stock outstanding at the beginning of $2019.$ Francis issued $2,100$ additional shares on May $1$ and $1,400$ additional shares on September $30.$ It also has two convertible securities outstanding at the end of $2019.$ These are:

Convertible preferred stock: $1,750$ shares of $8\mathrm{.}5\%,$ $$50$ par, preferred stock were issued on January $2,2016,$ for $$55$ per share. Each share of preferred stock is convertible into $3$ shares of common stock. Current dividends have been declared and paid. To date, no preferred stock has been converted.

Convertible bonds: Bonds with a face value of $$175,000$ and an interest rate of $6\mathrm{.}0\%$ were issued at par in $2018.$ Each $$1,000$ bond is convertible into $20$ shares of common stock. To date, no bonds have been converted.

Francis earned net income of $$72,500$ during $2019.$ The income tax rate is $30\%.$

$2.$ Calculate basic earnings per share for $2019.$ If required, round your answer to tw$3.$ Calculate diluted earnings per share for $2019$ and the incremental EPS of the preferred stock and convertible bonds. If required, round your answers to two decimal places.

Diluted earnings per share: $

Incremental earnings per share

Bonds: $

Preferred: $

$4$a$.$ Assume the same facts as above except that net income included a loss from discontinued operations of $$18,000$ net of income taxes. Compute basic EPS. If required, round your answer to two decimal places.

Basic earning per share: $

Show how the basic EPS you calculated should be reported to shareholders. You do not have to calculate diluted EPS.

Francis Company

EPS Computations

EPS Based on:

Income from continuing operations

$Income from continuing operations

Loss from discontinued operations$$

Loss from discontinued operations$$

Net income $$

Answer rating: 100% (QA)

To calculate basic earnings per share EPS for 2019 1 Determine the weighted average number of shares ... View the full answer