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    Act Part5

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    Moe Channel
    This document provides information to calculate earnings per share (EPS) for Davenport SA for the year ending December 31, 2020. It details that Davenport SA issued additional shares in 2020 and convertible bonds in July 2020. Davenport SA reported net income of €1,540,000 for 2020 and must calculate basic and diluted EPS using this information.

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    Act Part5

    Uploaded by

    Moe Channel
    488 views1 page
    This document provides information to calculate earnings per share (EPS) for Davenport SA for the year ending December 31, 2020. It details that Davenport SA issued additional shares in 2020 and convertible bonds in July 2020. Davenport SA reported net income of €1,540,000 for 2020 and must calculate basic and diluted EPS using this information.

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    This document provides information to calculate earnings per share (EPS) for Davenport SA for the year ending December 31, 2020. It details that Davenport SA issued additional shares in 2020 and convertible bonds in July 2020. Davenport SA reported net income of €1,540,000 for 2020 and must calculate basic and diluted EPS using this information.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    488 views1 page

    Act Part5

    Uploaded by

    Moe Channel
    This document provides information to calculate earnings per share (EPS) for Davenport SA for the year ending December 31, 2020. It details that Davenport SA issued additional shares in 2020 and convertible bonds in July 2020. Davenport SA reported net income of €1,540,000 for 2020 and must calculate basic and diluted EPS using this information.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    of 1

    a. Compute diluted earnings per share for 2020.

    b. Assume the same facts as those assumed for part E16.23a., except that the 75 bonds were
    issued on September 1, 2020 (rather than in 2019), and none have been converted or
    redeemed.
    c. Assume the same facts as assumed for part E16.23a., except that 25 of the 75 bonds were
    actually converted on July 1, 2020.
    E16.24 (LO5) (EPS with Convertible Bonds) On June 1, 2018, Bluhm Company and Amanar
    Company merged to form Davenport SA. A total of 800,000 shares were issued to complete the
    merger. The new company reports on a calendar-year basis.
    On April 1, 2020, the company issued an additional 600,000 shares for cash. All 1,400,000 shares were
    outstanding on December 31, 2020.
    Davenport SA also issued €600,000 of 20-year, 8% convertible bonds at par on July 1, 2020. Each
    €1,000 bond converts to 40 ordinary shares at any interest date. None of the bonds have been
    converted to date. The interest expense on the liability component of convertible bonds for 2020 was
    €30,000.
    Davenport SA is preparing its annual report for the fiscal year ending December 31, 2020. The annual
    report will show earnings per share figures based upon a reported after-tax net income of €1,540,000.
    (The tax rate is 40%.)
    Instructions

    Determine the following for 2020.


    a. The number of shares to be used for calculating:
    1. Basic earnings per share.
    2. Diluted earnings per share.
    b. The earnings figures to be used for calculating:
    1. Basic earnings per share.
    2. Diluted earnings per share.
    E16.25 (LO1,5) (EPS with Convertible Bonds and Preference Shares) The Ottey Corporation issued
    10-year, $4,000,000 par, 7% callable convertible subordinated debentures on January 2, 2019. The
    bonds have a par value of $1,000, with interest payable annually. The interest expense recorded on
    the liability component of the convertible bond for 2019 was $320,000. The current conversion ratio is
    14:1, and in 2 years it will increase to 18:1. At the date of issue, the bonds were sold at 98. Ottey's
    effective tax was 35%. Net income in 2019 was $7,500,000, and the company had 2,000,000 shares
    outstanding during the entire year.
    Instructions

    a. Prepare a schedule to compute both basic and diluted earnings per share.
    b. Discuss how the schedule would differ if the security was convertible preference shares.
    E16.26 (LO1,5) (EPS with Convertible Bonds and Preference Shares) On January 1, 2019, Lund
    SA issued 10-year, €3,000,000 face value, 6% bonds, at par. Each €1,000 bond is convertible into 15
    ordinary shares of Lund. Lund's net income in 2020 was €240,000, and its tax rate was 40%. Interest
    expense on the liability component in 2020 was €210,000. The company had 100,000 ordinary
    shares outstanding throughout 2019. None of the bonds were converted in 2019.
    Instructions

    1359

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