Spencer Inc.'s earnings of $500,000 reflects a tax rate of 25%. During the entire year, the...

 

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Spencer Inc.'s earnings of $500,000 reflects a tax rate of 25%. During the entire year, the company had the following securities outstanding: 120,000 shares of common stock. 5,000 shares of 6%, $100 par, nonconvertible, cumulative preferred stock. 5,000 shares of 6%, $100 par, cumulative preferred stock, each convertible into 1.75 shares of common stock. 500 bonds, $1,000 face value, 8% interest, each convertible into 30 shares of common stock (issued at face value). 200 bonds, $1,000 face value, 6% interest, each convertible into 20 shares of common stock (issued at face value). Required a. Compute basic EPS. b. Compute diluted EPS. Spencer Inc.'s earnings of $500,000 reflects a tax rate of 25%. During the entire year, the company had the following securities outstanding: 120,000 shares of common stock. 5,000 shares of 6%, $100 par, nonconvertible, cumulative preferred stock. 5,000 shares of 6%, $100 par, cumulative preferred stock, each convertible into 1.75 shares of common stock. 500 bonds, $1,000 face value, 8% interest, each convertible into 30 shares of common stock (issued at face value). 200 bonds, $1,000 face value, 6% interest, each convertible into 20 shares of common stock (issued at face value). Required a. Compute basic EPS. b. Compute diluted EPS.

Answer rating: 100% (QA)

a Basic EPS is calculated by dividing the earnings available to common shareholders by the weighted average number of common shares outstanding during ... View the full answer