Question

Answer to b(2)

Intermediate Accounting 1/I (AC 221/222) Gradebook ORION Downloadable eTextbook nment Exercise 16-23 Your answer is partially correct. Try again. On June 1, 2015, Whispering Company and Metlock Company merged to form Bonita Inc. A total of 752,000 shares were issued to complete the merger. The new corporation reports on a calendar-year basis. On April 1, 2017, the company issued an additional 562,000 shares of stock for cash. All 1,314,000 shares were outstanding on December 31, 2017 Bonita Inc also issued $600,000 of 20-year, 7% convertible bonds at par on July 1, 2017 Each $1,000 bond converts to 44 shares of common at any interest date. None of the bonds have been converted to date. Bonita Inc. is preparing ts annual report for the fical vear ending December 31, 2017. The amual report wil how earmings per share figures income of $1,614,000. (The tax rate is 40%.) Determine the following for 2017. (a) The number of shares to be used for calculating: (Round answers to o decimal places, e.g. $2.50o.) (1) Basic earnings per share (2) Diluted earnings per share 1186700 shares (b) The earnings figures to be used for calculating: (Round answers to 0 decimal places, e.g. $2,50o.) (1) Basic earnings per share 1173500 shares 1614

Answer 1

a-1)	Calculation of the number of shares used for calculating Basic Earning per share
		No. of shares		period
		752000		03-Dec		188000
		1314000		09-Dec		985500
	Wighted average No of shares outstanding					1173500	Answer
a-2)	Calculation of the number of shares used for calculating Diluted Earning per share
		No. of shares		period
		752000		03-Dec		188000
		1314000		03-Dec		328500
	with Bonds	1340400		06-Dec		670200
	Wighted average No of shares outstanding					1186700	Answer
	Each bonds to ber converted into 44 common stock i.e. 600 Bonds *44 common=26400 Potential equity shares
b-1)	Calculation of earning figures to be used for calculating Basic Earning per share
	After Tax net Income will be earnings				=	$1,614,000
b-2)	Calculation of earning figures to be used for calculating Diluted Earning per share
	After tax net Income					1614000
	Interest for the 2017		2100000		21000
	Tax effect on Interest		@40%		8400	12600
				Earnings	=	1626600