Lazy Co. had the following capital structure as of December 31, 2017 (irn thousa

Question

Lazy Co. had the following capital structure as of December 31, 2017 (irn thousands of dollars, except per share amounts) Common stock; $10 par; 6,750,000 shares authorized, 5,000,000 shares issued, and 4,000,000 shares outstanding $50,000 8% convertible preferred stock (each share convertible into 7 shares of common); $100 par; 100,000 shares authorized, 4,000 40,000 shares outstanding Stock warrants outstanding (for 50,000 shares) 75 Paid-in capital in excess of par-common 25,000 36,000 (28,000) Retained earnings Less: Treasury stock at cost Total stockholders' equity $87,075 In addition, Lazy had $ 15,000,000 in 1000, 10 year convertible bonds due July 1, 2027. The bonds were issued July 1, 2017 at 96% of face value and pay interest semiannually. Each $1,000 bond is convertible into 25 shares of common. Lazy uses the effective interest method for computing interest expense. Each stock warrant plus $32 is exchangeable for one share of common. The warrants were issued on October 1,2016 and expire March 31,2019. During 2017, 500,000 shares of common were issued on June 1. Also, all the treasury shares were repurchased on November 30. No shares of convertible preferred were issued during 2017. The average market price of Lazy's common during 2017 was $33. Lazy's 2017 net income was $14,000,000. Lazy's effective income tax rate in 2017 was 40%.

Explanation / Answer

Solution A:

Computation of weighted average outstanding shares Period Outstanding shares Fraction Weighted average outstanding shares 1-Jan-17 to 31-May-17 4500000 5/12 1875000 1-Jun-17 to 30-Nov-17 5000000 6/12 2500000 1-Dec-17 to 31-Dec-17 4000000 1/12 333333 Weighted average outstanding shares 4708333

Related Questions

Navigate

• Browse (All)
• Browse L
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.