E10-15 Effect of Convertible Bonds on Earnings per Share LO 18-4 Poppy Corporation owns 60 percent of Seed Company's common shares. Balance sheet data for the companies on December 31, 20X2, are as follows: Poppy Corporation. Seed Company Assets Cash Accounts Receivable Inventory Buildings and Equipment Less: Accumulated Depreciation. Investment in Seed Company Stock Total Assets Liabilities and Owners' Equity Accounts Payable Bonds Payable Common Stock ($10 par value) $ 91,000 86,000 $ 33,000 52,000 119,000 97,000 680,000 390,000 (210,000) (78,000) 141,000 $ 907,000 $117,000 250,000 $494,000 $ 59,000 200,000 300,000 100,000 240,000 135,000 Total Liabilities and Owners' Equity $ 907,000 $494,000 Retained Earnings The bonds of Poppy Corporation and Seed Company pay annual interest of 8 percent and 10 percent, respectively. Poppy's bonds are not convertible. Seed's bonds can be converted into 10,000 shares of its company stock any time after January 1, 20X1. An income tax rate of 40 percent is applicable to both companies. Seed reports net income of $36,000 for 20X2 and pays dividends of $10,000. Poppy reports income from its separate operations of $46,000 and pays dividends of $20,000. Required: Compute basic and diluted EPS for the consolidated entity for 20X2. (Round your answers to 2 decimal places.) Basic earnings per share $ 1.88 Diluted earnings per share $ 1.92
E10-15 Effect of Convertible Bonds on Earnings per Share LO 18-4 Poppy Corporation owns 60 percent of Seed Company's common shares. Balance sheet data for the companies on December 31, 20X2, are as follows: Poppy Corporation. Seed Company Assets Cash Accounts Receivable Inventory Buildings and Equipment Less: Accumulated Depreciation. Investment in Seed Company Stock Total Assets Liabilities and Owners' Equity Accounts Payable Bonds Payable Common Stock ($10 par value) $ 91,000 86,000 $ 33,000 52,000 119,000 97,000 680,000 390,000 (210,000) (78,000) 141,000 $ 907,000 $117,000 250,000 $494,000 $ 59,000 200,000 300,000 100,000 240,000 135,000 Total Liabilities and Owners' Equity $ 907,000 $494,000 Retained Earnings The bonds of Poppy Corporation and Seed Company pay annual interest of 8 percent and 10 percent, respectively. Poppy's bonds are not convertible. Seed's bonds can be converted into 10,000 shares of its company stock any time after January 1, 20X1. An income tax rate of 40 percent is applicable to both companies. Seed reports net income of $36,000 for 20X2 and pays dividends of $10,000. Poppy reports income from its separate operations of $46,000 and pays dividends of $20,000. Required: Compute basic and diluted EPS for the consolidated entity for 20X2. (Round your answers to 2 decimal places.) Basic earnings per share $ 1.88 Diluted earnings per share $ 1.92
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Chapter17: Synthesis And Extensions
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Problem 11P
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Transcribed Image Text:E10-15 Effect of Convertible Bonds on Earnings per Share LO 18-4
Poppy Corporation owns 60 percent of Seed Company's common shares. Balance sheet data for the companies on December 31,
20X2, are as follows:
Poppy
Corporation.
Seed
Company
Assets
Cash
Accounts Receivable
Inventory
Buildings and Equipment
Less: Accumulated Depreciation.
Investment in Seed Company Stock
Total Assets
Liabilities and Owners' Equity
Accounts Payable
Bonds Payable
Common Stock ($10 par value)
$ 91,000
86,000
$ 33,000
52,000
119,000
97,000
680,000
390,000
(210,000)
(78,000)
141,000
$ 907,000
$117,000
250,000
$494,000
$ 59,000
200,000
300,000
100,000
240,000
135,000
Total Liabilities and Owners' Equity
$ 907,000
$494,000
Retained Earnings
The bonds of Poppy Corporation and Seed Company pay annual interest of 8 percent and 10 percent, respectively. Poppy's bonds are
not convertible. Seed's bonds can be converted into 10,000 shares of its company stock any time after January 1, 20X1. An income tax
rate of 40 percent is applicable to both companies. Seed reports net income of $36,000 for 20X2 and pays dividends of $10,000.
Poppy reports income from its separate operations of $46,000 and pays dividends of $20,000.
Required:
Compute basic and diluted EPS for the consolidated entity for 20X2. (Round your answers to 2 decimal places.)
Basic earnings per share
$
1.88
Diluted earnings per share
$
1.92
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