The following information is available for Jenks Inc. for 2006: Common stock out
ID: 2597467 • Letter: T
Question
The following information is available for Jenks Inc. for 2006:
Common stock outstanding during the year $100,000 shares
Net Income for 2006 $350,000
5% Convertible Preferred Stock, $100 par value 5,000 shares
8% Convertible Bonds Payable issued at par $1,000,000
Tax Rate 40%
Each share of the Preferred Stock is convertible into 2 shares of common stock. The preferred stock is cumulative. Each $1,000 bond can be converted into 15 shares of common stock, thus 15,000 shares.
Required: compute the necessary earnings per share for 2006 for Jenks, Inc
Please SHOW WORK and answer right
Explanation / Answer
Computation of Basic Earnings per share: A Net Income 350000 B Less: Preferred Stock Dividend 5000*100*5% 25000 C Earnings available to Common Stockholders A-B 325000 D Outstanding Number of Shares 100000 E Basic Earnings per share C/D 3.25 Computation of Diluted Earnings per share: A Net Income 350000 B Add: Taxes (350000/60%)40% 233333.3 C Earnings before tax A+B 583333.3 D Interest 1000000*8% 80000 E Earnings before Interest & Taxes C+D 663333.3 F Less: Taxes E*40% 265333.3 G Earnings after Taxes E-F 398000 H Oustanding Number of shares: Common Stock 100000 Convertible Preferred Stock (5000*2) 10000 Convertible Bonds 15000 125000 I Diluted Earnings per share G/H 3.184
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