Detail explanation please. Carla Vista Corporation had net income of $52,300 for

Question

Detail explanation please.

Carla Vista Corporation had net income of $52,300 for the year ended December 31, 2017, and a weighted average number of common shares outstanding of 10,400. The following information is provided regarding the capital structure 1 ase convertible debt 240 bonds each convertible into 41 common shares. The bonds were outstanding for the entre year. The income tax rate is 25% The bonds vere issued at par $1 oso per bond No bonds ere come ted dur ng the year 2. 3% convertible, cumulative $120 preferred shares, 1,200 shares issued and outstanding. Each preferred share is convertible into 2 common shares. The preferred shares were issued at par and were outstanding the entire year. No shares ngthe ea0 were converted during the year. Calculate the basic earnings per share for 2017. (Round answer to 2 decimal places, e.g. 15.25.) Basic earnings per share $ Calculate the diluted earnings per share for 2017, using the if-converted method. For simplicity, ignore the requirement to record the debt and equity components of the bonds separately. (Round answer to 2 decimal places, e.g. 15.25.) Diluted earnings per share when Carla Vista Corporation issued the 8% convertible debt, would the company's interest rate on straight debt have been higher or lower than 8967 when Carla Vista Corporation issued the 8% convertible debt, the company's interest rate on straight debt have been than 8%.

Explanation / Answer

Ans. 1

Earning during the year 2017            = $52300

Less: Prefernce share dividend (120X1200)X3%      = $4320

Earning available for equity                                   = $47980

Weighted Average no equity share = 10400

Basic Eps = 47980/10400 = 4.61 per share

Calculation of diluted earning

Income avialble for equity                      = $47980

Add: Convertable preferred dividend        =$4320

Add: Intt. on convertable debt

(240X1080) X(.08-.25) = $15552

Total diluted earning = 67852

Step : 2 Calculation of diluted no of share

Existing equity share                         = 10400

Convertable Bond (240X41 )                    = 9840

Convertable Preferred stock(1200X2) = 2400

Total diluted Share = 22640

Diluted EPS = Diluted Earning/diluted shares

   = 67852/22640 = 3 per share           

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