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    IA 3 Chapter 20 River Co

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    Prytj Elmo Quimbo
    R Company issued $2 million bonds convertible to 10 ordinary shares each. Their net income for 2020 was $2.749 million with 100,000 ordinary shares outstanding. To calculate diluted earnings per share, interest expense on the bonds for 9 months is added to net income, and it is assumed the bonds would convert to 15,000 additional shares. The basic earnings per share is $27.49, and the diluted earnings per share is $25.

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    IA 3 Chapter 20 River Co

    Uploaded by

    Prytj Elmo Quimbo
    121 views1 page
    R Company issued $2 million bonds convertible to 10 ordinary shares each. Their net income for 2020 was $2.749 million with 100,000 ordinary shares outstanding. To calculate diluted earnings per share, interest expense on the bonds for 9 months is added to net income, and it is assumed the bonds would convert to 15,000 additional shares. The basic earnings per share is $27.49, and the diluted earnings per share is $25.

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    IA_3___Chapter_20_River_Co..docx

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    R Company issued $2 million bonds convertible to 10 ordinary shares each. Their net income for 2020 was $2.749 million with 100,000 ordinary shares outstanding. To calculate diluted earnings per share, interest expense on the bonds for 9 months is added to net income, and it is assumed the bonds would convert to 15,000 additional shares. The basic earnings per share is $27.49, and the diluted earnings per share is $25.

    Copyright:

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

    IA 3 Chapter 20 River Co

    Uploaded by

    Prytj Elmo Quimbo
    R Company issued $2 million bonds convertible to 10 ordinary shares each. Their net income for 2020 was $2.749 million with 100,000 ordinary shares outstanding. To calculate diluted earnings per share, interest expense on the bonds for 9 months is added to net income, and it is assumed the bonds would convert to 15,000 additional shares. The basic earnings per share is $27.49, and the diluted earnings per share is $25.

    Copyright:

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

    Intermediate Accounting III - Chapter 20

    Case 1. On April 2020, R Company issued P2,000,000 12% bonds at face


    amount. Each P1,000 bond is convertible into 10 ordinary shares. The
    entity reported an income (net) of P2,749,000 for the year ended
    December 31, 2020. The average number of ordinary shares outstanding
    was 100,000 shares and the income tax rate is 30%.

    Required:
    1. Basic earnings per share
    2. Diluted earnings per share

    CASE
    1
    R Co.
    BASIC EARNINGS PER
    SHARE
    Net Income
    Ordinary Shares actually
    Basic Earnings per share =
    outstanding

    Basic Earnings per share = P 2,749,000


    100,000

    Basic Earnings per share = P 27.49

    DILUTED EARNINGS PER SHARE

    P
    Net Income
    2,749,000
    Add: Interest Bonds Payable (2M x
    180,000
    12% x 9/12)
    Income Tax (180K x 30,000) (54,000) 126,000
    P
    Adjusted Net Income
    2,875,000

    Ordinary Shares Outstanding 100,000


    Assumed Issued Ordinary Shares (2,000 x 10 x 9/12) 15,000
    Total Ordinary Shares 115,000

    (P 2,875,000 /
    Diluted EPS P 25
    115,000)

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