Francis Company has 21,600 shares of common stock outstanding at the beginning o
ID: 2459254 • Letter: F
Question
Francis Company has 21,600 shares of common stock outstanding at the beginning of 2013. Francis issued 2,700 additional shares on May 1 and 1,800 additional shares on September 30. It also has two convertible securities outstanding at the end of 2013. These are:
Convertible preferred stock: 2,250 shares of 9.0%, $50 par, preferred stock were issued on January 2, 2010, for $60 per share. Each share of preferred stock is convertible into 3 shares of common stock. Current dividends have been declared and paid. To date, no preferred stock has been converted.
Convertible bonds: Bonds with a face value of $225,000 and an interest rate of 5.5% were issued at par in 2012. Each $1,000 bond is convertible into 25 shares of common stock. To date, no bonds have been converted.
Francis earned net income of $80,000 during 2013. The income tax rate is 30%.
3. Calculate diluted earnings per share for 2013 and the incremental EPS of the preferred stock and convertible bonds. If required, round your answers to the nearest cent.
Diluted earnings per share: $
1. Compute the number of shares of common stock that Francis should use in calculating basic earnings per share for 2013.
Weighted average shares outstanding: shares
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2. Calculate basic earnings per share for 2013. If required, round your answer to the nearest cent.
Basic earnings per share: $
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3. Calculate diluted earnings per share for 2013 and the incremental EPS of the preferred stock and convertible bonds. If required, round your answers to the nearest cent.
Diluted earnings per share: $
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4a. Assume the same facts as above except that net income included a loss from discontinued operations of $15,300 net of income taxes. Compute basic EPS. You do not have to calculate diluted EPS for this case. If required, round your answer to the nearest cent.
Basic earning per share: $
4b. Show how the basic EPS you calculated should be reported to shareholders. You do not have to calculate diluted EPS.
Francis Company
EPS Computations
EPS Based on:
$
$
Incremental earnings per share Bonds: $ Preferred: $Explanation / Answer
Explanation Earnings Shares EPS Adjustment Adjustment Basic Earnings & shares 69875 21600 3.23 Basic EPS Pref dividend savings 10125 Increment in common shares 6750 Tentitive Dilutive EPS 80000 28350 2.82 Dilutive EPS Bond interest Expense Savings 8663 Increment in common shares 5625 Diluted Earnings & Share 88,663 33,975 2.61 Dilutive EPS *69875= 80000 Net income - 10125 Prefrence dividend **Impact on diluted Earnings Bonds =(225000*5.5%)*(1-0.3) /(225*25) =1.54 Pref =10125/(2250*3)=1.50
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