PLEASE ANSWER QUESTION A PART 1 and 2 QUESTION B Part 1 and 2 and QUESTION C Par

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PLEASE ANSWER QUESTION A PART 1 and 2 QUESTION B Part 1 and 2 and QUESTION C Part 1

Pleae complete it on excel or copy paste it from excel

A.

ClassCo sells Convertible Bond with warrant to convert into stock

Bond with face

$1,000

Face Rate

8.00%

Term

3

Yrs.

Market rate @ sale

8.50%

issued:

6/30/2018

maturity

6/30/2021

Interest paid annually

Bond sold for

              996.00

Part 1) determine value received from sale, Discount or Premium?

Part 2) Prepare JE to record sale, use incremental

assume value of Bond in the known

and value of warrant is incremental

B.

ClassCo:

PE 12/31/2018

Fiscal = calendar Yr.

Net income: after tax

2000

shares:

Beginning:

505

3/1 issue

50

9/1 issue

60

Treasury Purchase 10/30

         (24)

on 11/22, 3 for 1 split

Preferred dividends this year =

250

Part 1) Calculate EPS

Part 2)   using "as if" compute EPS & dilutive effect of Convertible Bonds

issued 10 bonds , $1000 bonds issued prior yr., 6%, each bond was convertible into 30 shares

40% tax rate for bonds

C.

NET Income:

4500

No preferred stock

Average # of Shares

2200

EPS =

2.045

Stock Options:

all full Yr.

# option shares

500

0ption price per share

$18

Market at PE being measured

$32

Part 1

Compute dilutive effect per share

A.

ClassCo sells Convertible Bond with warrant to convert into stock

Bond with face

$1,000

Face Rate

8.00%

Term

3

Yrs.

Market rate @ sale

8.50%

issued:

6/30/2018

maturity

6/30/2021

Interest paid annually

Bond sold for

              996.00

Part 1) determine value received from sale, Discount or Premium?

Part 2) Prepare JE to record sale, use incremental

assume value of Bond in the known

and value of warrant is incremental

B.

ClassCo:

PE 12/31/2018

Fiscal = calendar Yr.

Net income: after tax

2000

shares:

Beginning:

505

3/1 issue

50

9/1 issue

60

Treasury Purchase 10/30

         (24)

on 11/22, 3 for 1 split

Preferred dividends this year =

250

Part 1) Calculate EPS

Part 2)   using "as if" compute EPS & dilutive effect of Convertible Bonds

issued 10 bonds , $1000 bonds issued prior yr., 6%, each bond was convertible into 30 shares

40% tax rate for bonds

C.

NET Income:

4500

No preferred stock

Average # of Shares

2200

EPS =

2.045

Stock Options:

all full Yr.

# option shares

500

0ption price per share

$18

Market at PE being measured

$32

Part 1

Compute dilutive effect per share

Explanation / Answer

ANSWER TO PART NO A

A) BOND IS SOLD AT RS 996/ AND BOND HAS A FACE VALUE OF RS 100/- . IT MEANS BOND IS MATURED AT DISCOUNT. THE REASON IS THAT BOND IS AVAILABLE AT LESSER VALUE THAN THE FACE VALUE IN THE MARKET TO THE INVESTOR.

JOURNAL ENTRY TO RECORD THE SALE IS :-

AMOUNT IN $

BANK A/C DR 996

DISCOUNT A/C DR 4

TO 8% BONDS 1000

C) ANSWER TO PART NO C

CALCULATION OF DILLUTED EARNING PER SHARE

= (NET INCOME AFTER DILLUTION-PREFERENCE DIVIDEND)/WEIGHTED NO OF EQUITY SHARES OUTSTANDING POST DILUTION

CASE NO 1 LET NET INCOME IS AFTER DILLUTION.

= 4500/(2200+500) = 1.667

CASE NO 2 LET NET INCOME IS BEFORE DILLUTION.

FUNDS RAISED FROM OPTION SHAREHOLDERS WILL INCREASE THE CURRENT NET INCOME OF THE COMPANY. SO THE NET INCOME OF THE COMPANY GETS INCREASED BY RS 500*18= RS 9000

=(4500+500*18)/(2200+500) = 5

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