Question

The information below pertains to Stellar Company for 2021. Net income for the year$1,240,000 7% convertible bonds issued at par ($1,000 per bond); each bond is convertible into 30 shares of common stock1,970,000 6% convertible, cumulative preferred stock, $100 par value; each share is convertible into 3 shares of common stock3,970,000 Common stock, $10 par value6,010,000 Tax rate for 202120% Average market price of common stock$25 per share

Answer 1

Answer:

The Question is missing requirement which should be;

Calculate Diluted EPS for the stellar company for the year 2021

Explanation:

Convertible Bonds                 ($1,970,000/1000)*30  59,100

Preferred Stocks         (3,970,000/100)*3                     119,100

Common Stocks  (6,010,000/10)                                   601,000

Total Weighted Average Stocks                                    779,200

Diluted EPS=Net Income*(1-t)+after tax cost of interest/Weighted average stocks=$1,240,000*(1-20%)+1,970,000*7%*(1-20%)+3,970,000*6%*(1-20%)/779,200

=992,000+110,320+190,560/779,200

=$1.66