Raimer Corp has 400,000 shares of $20 par value common stock outstanding through
ID: 2500270 • Letter: R
Question
Raimer Corp has 400,000 shares of $20 par value common stock outstanding throughout 20x2. In addition, the corporation has 5000 7% bonds issued at par in 20x0. Each $1000 bond is convertible into (20) twenty shares of common stock. During 20x2 the corporation earned $600,000 of Net Income, The Tax rate was 30%.
A) Compute earnings per share amount(s) for 20x2
B) Assume that the bonds were issued at a premium, instead of being issued at par. Assume that 100 of the bonds were converted to common stock in 20x3. On The conversion date, the bonds had a book value of $103,000. Record the conversion
Explanation / Answer
(a) Earning per share= Net Income/Average outstanding shares Net Income 600000 Average outstanding shares 420000 = 1.4285714 2000 (b) Convertible Bond A/c 2300 To share Capital A/c 2000 To Security Premium A/c 300 (Being Bond are converted)
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