The following data relate to Montreal Ltd. for the calendar year 2020: Net income $3,250,000 Average...

 

Transcribed Image Text:

The following data relate to Montreal Ltd. for the calendar year 2020: Net income $3,250,000 Average number of common shares outstanding during 2020 1,200,000 8%, cumulative convertible preferred shares: convertible into 90,000 common shares $1,800,000 6% convertible bonds; convertible into 60,000 common shares $2,000,000 105.000 call options, exercisable at $30 per share 460,000 put option exercisable at $25 per share Additional information 1. All the convertible securities and stock options were outstanding all year. 2. In 2020, total of $ 400,000 dividend was declared and distributed; however, no dividends were declared in 2019. 3. The average market price of the common shares in 2020 was $35. 4. The convertible bonds were sold at par. 5. The income tax rate for 2020 is 30%. Instructions a) Calculate basic EPS. b) Calculate diluted EPS. Use the three-step process in arriving at your answers. (In your answer start with basic EPS and then shbw the incremental effect of each instrument in the right order and finally show clearly the amount of diluted EPS) The following data relate to Montreal Ltd. for the calendar year 2020: Net income $3,250,000 Average number of common shares outstanding during 2020 1,200,000 8%, cumulative convertible preferred shares: convertible into 90,000 common shares $1,800,000 6% convertible bonds; convertible into 60,000 common shares $2,000,000 105.000 call options, exercisable at $30 per share 460,000 put option exercisable at $25 per share Additional information 1. All the convertible securities and stock options were outstanding all year. 2. In 2020, total of $ 400,000 dividend was declared and distributed; however, no dividends were declared in 2019. 3. The average market price of the common shares in 2020 was $35. 4. The convertible bonds were sold at par. 5. The income tax rate for 2020 is 30%. Instructions a) Calculate basic EPS. b) Calculate diluted EPS. Use the three-step process in arriving at your answers. (In your answer start with basic EPS and then shbw the incremental effect of each instrument in the right order and finally show clearly the amount of diluted EPS)

Answer rating: 100% (QA)

a Calculation of Basic Earning Per Share Basic Earning Per share Net income preference dividend Aver... View the full answer