Convertible Preferred Stock, Convertible Bonds, and EPS Francis Company has 16,800 shares of common stock outstanding at the beginning of 2013.
Convertible Preferred Stock, Convertible Bonds, and EPS
Francis Company has 16,800 shares of common stock outstanding at the beginning of 2013. Francis issued 2,100 additional shares on May 1 and 1,400 additional shares on September 30. It also has two convertible securities outstanding at the end of 2013. These are:
- Convertible preferred stock: 1,750 shares of 8.0%, $50 par, preferred stock were issued on January 2, 2010, for $55 per share. Each share of preferred stock is convertible into 2 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 $175,000 and an interest rate of 5.0% were issued at par in 2012. Each $1,000 bond is convertible into 20 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%.
4b. Show how the basic EPS you calculated should be reported to shareholders. You do not have to calculate diluted EPS.