The Simon Corporation issued 10 year, $5,000,000 par, 7 callable convertible subordinated debentures on January 2, 2014 The bonds have a par value of $1,000, with interest payable annually The current conversion ratio is 14 1, and in 2 years it will increase to 18 1 At the date of issue, the bonds ...

a Net income for year 9500000 Add Adjustment for interest net of tax 23400 ...

The Simon Corporation issued 10-year, $5,000,000 par, 7% callable convertible subordinated debentures on January 2, 2014. The

Question:

The Simon issued 10-year, $5,000,000 par, 7% callable convertible subordinated on January 2, 2014. The bonds have a of $1,000, with interest payable annually. The current conversion ratio is 14:1, and in 2 years it will increase to 18:1. At the date of issue, the bonds were sold at 98. Bond discount is amortized on a straight-line basis. Simon’s effective tax was 35%. Net income in 2014 was $9,500,000, and the company had 2,000,000 shares outstanding during the entire year.

Instructions
(a) Prepare a schedule to compute both basic and diluted earnings per share.
(b) Discuss how the schedule would differ if the security was convertible preferred stock.

Debentures
Debenture DefinitionDebentures are corporate loan instruments secured against the promise by the issuer to pay interest and principal. The holder of the debenture is promised to be paid a periodic interest and principal at the term. Companies who... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...