Garfun, Inc., owns all of the stock of Simon, Inc. For 2014, Garfun reports income (exclusive of any investment income) of $480,
000. Garfun has 80,000 shares of common stock outstanding. It also has 5,000 shares of preferred stock outstanding that pay a dividend of $15,000 per year. Simon reports net income of $290,000 for the period with 80,000 shares of common stock outstanding. Simon also has a liability for 10,000 of $100 bonds that pay annual interest of $8 per bond. Each of these bonds can be converted into three shares of common stock. Garfun owns none of these bonds. Assume a tax rate of 30 percent.What amount should Garfun report as diluted earnings per share? (Round your intermediate percentage value to the nearest whole number and the final answer to 2 decimal places.)
1 answer:
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Answer: $40,000
Explanation:
Hello. Your question was incomplete as it lacked the balance sheet in question. Luckily I found it and have now attached it.
The question states that the central bank has set a required reserve ratio of 10%. This means that 10% of the deposits at the bank are not to be touched so they cannot loan past 90% of the deposits.
The bank has only $60,000 remaining to loan out as they will not sell their securities.
So we will calculate how much they can loan out thus,
= 60,000 - (200,000 * 10%) to find out what amount cannot be touched
= 60,000 - 20,000
= $40,000
The maximum amount of additional loans the bank in Jamestown can undertake is $40,000.
