During the current year, Beta Corporation had 4 million shares of common stock o
ID: 2792110 • Letter: D
Question
During the current year, Beta Corporation had 4 million shares of common stock outstanding. 2,200, $1,000, 7% convertible bonds were issued at face amount at the beginning of the year. Beta reported income before tax of $11 million and net income of $6.6 million for the year. Each bond is convertible into 10 shares of common stock. What is diluted EPS? (Round your answer to 2 decimal places. Do not round your intermediate calculations.) rev: 04_18_2013_QC_29274, 04_26_2014_QC_48794, 04_21_2015_QC_CS-14202 $1.66. $1.65. $1.67. $1.64.
Explanation / Answer
Tax amount=Income before tax-Net income
=$11,000,000-$6,600,000
=$4,400,000
Tax rate=Tax amount/Income before tax
=$4,400,000/$11,000,000
=40%
Income before tax=$11,000,000+(2,200*$1,000*7%)
=$11,154,000
Net income=Income before tax(1-Tax)
=$11,154,000(1-40%)
=$6,692,400
Diluted EPS=Net income/Shares outstanding
=$6,692,400/(4,000,000+22,000)
=$1.66
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