WildhorseCorporation is preparing earnings per share data for 2020. The net income for the year ended December
Question:
Wildhorse Corporation is preparing earnings per share data for 2020. The net income for the year ended December 31, 2020, was $407,000 and there were 59,200 common shares outstanding during the entire year. Wildhorse has the following two convertible securities outstanding:
10% convertible bonds (each $1,000 bond is convertible into 25 common shares) $100,0004% convertible $100 par value preferred shares (each share is convertible into 3 common shares) $47,000
Both convertible securities were issued at face value in 2017. Wildhorse's income tax rate is 24%. The preferred shares are cumulative. For simplicity, ignore the requirement to record the debt and equity components of the bonds separately.
Assume that 40% of the convertible bonds were converted to common shares on April 1, 2020.
The balances at December 31, 2020 do not reflect the conversion of April 1, 2020.
Calculate the after-tax interest paid on the 10% bonds.
After-tax interest on bonds converted:......................
Intermediate accounting
ISBN: 978-0077647094
7th edition
Authors: J. David Spiceland, James Sepe, Mark Nelson