Gradebook, ORION Downloadable eTextbook ent 3 (Part Level S Following is informa

Question

Gradebook, ORION Downloadable eTextbook ent 3 (Part Level S Following is information taken from Skysong Inc.'s December 31, 2018 balance sheet 5% bonds payable, $5,800,000 maturing December 31, 2022, each $1,000 bond convertible into 22 common shares 5,800,000 8% bonds payable, $4,700,000, maturing December 31, 2020, each $1,000 bond convertible into 28 common shares at any time up to December 31, 2018 $4,700,000 Cumulative preferred shares, $4, no-par value, convertible at 1 preferred share for 4 common shares, 47,000 shares outstanding Common shares, no par-value, 2,900,000 shares outstanding $940,000 Skysong's net income for 2018 was $8,640,000, and the company was subject to an income tax rate of 20%. Both classes of bonds were outstanding the entire year, as were the preferred shares. The weighted-average number of common shares outstanding during the period was 3,930,000. (For simplicity, ignore the requirement to record the debt and equity portions of the convertible bond separately) Calculate Skysong's basic EPS for 2018. (Round answer to 2 decimal places, e.g. 15.25.) Basic EPS

Explanation / Answer

Solution:

Net income for 2018 = $8,640,000

Weighted average number of common shares outstanding = 3930000

Earnings for common shareholder = Net Income - Preferred dividend = $8,640,000 - 47000*$4 = $8,452,000

Basic EPS = Income for common shareholders / Weighted average common shares outstanding

= $8,452,000 / 3930000 = $2.15 per share

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