Following is information taken from Blossom Inc.’s December 31, 2020 balance sheet: 8% bonds payable, $5,200,000 maturing December 31, 2023, each $1,000 bond convertible into 17 common shares $5,200,000 5% bonds payable, $3,200,000, maturing December 31, 2025, each $1,000 bond convertible into 51 common shares at any time up to December 31, 2023 $3,200,000 Cumulative preferred shares, $4, no-par value, convertible at 1 preferred share for 4 common shares, 104,000 shares outstanding $2,704,000 Common shares, no par-value, 2,500,000 shares outstanding Blossom’s net income after tax for 2020 was $5,516,000, and the company was subject to an income tax rate of 42%. Both classes of bonds were outstanding the entire year, as were the preferred shares. The weighted-average number of common shares outstanding during the period was 2,400,000. (For simplicity, ignore the requirement to record the debt and equity portions of the convertible bond separately). Calculate the income effect of the dividends on preferred shares. Calculate Blossom’s basic EPS for 2020 Calculate the after-tax interest paid on the 8% bonds.
Following is information taken from Blossom Inc.’s December 31, 2020 balance sheet: 8% bonds payable, $5,200,000 maturing December 31, 2023, each $1,000 bond convertible into 17 common shares $5,200,000 5% bonds payable, $3,200,000, maturing December 31, 2025, each $1,000 bond convertible into 51 common shares at any time up to December 31, 2023 $3,200,000 Cumulative preferred shares, $4, no-par value, convertible at 1 preferred share for 4 common shares, 104,000 shares outstanding $2,704,000 Common shares, no par-value, 2,500,000 shares outstanding Blossom’s net income after tax for 2020 was $5,516,000, and the company was subject to an income tax rate of 42%. Both classes of bonds were outstanding the entire year, as were the preferred shares. The weighted-average number of common shares outstanding during the period was 2,400,000. (For simplicity, ignore the requirement to record the debt and equity portions of the convertible bond separately). Calculate the income effect of the dividends on preferred shares. Calculate Blossom’s basic EPS for 2020 Calculate the after-tax interest paid on the 8% bonds.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Following is information taken from Blossom Inc.’s December 31, 2020
| 8% bonds payable, $5,200,000 maturing December 31, 2023, each $1,000 bond convertible into 17 common shares |
$5,200,000 | ||
| 5% bonds payable, $3,200,000, maturing December 31, 2025, each $1,000 bond convertible into 51 common shares at any time up to December 31, 2023 |
$3,200,000 | ||
| Cumulative 1 preferred share for 4 common shares, 104,000 shares outstanding |
$2,704,000 | ||
| Common shares, no par-value, 2,500,000 shares outstanding |
Blossom’s net income after tax for 2020 was $5,516,000, and the company was subject to an income tax rate of 42%. Both classes of bonds were outstanding the entire year, as were the preferred shares. The weighted-average number of common shares outstanding during the period was 2,400,000. (For simplicity, ignore the requirement to record the debt and equity portions of the convertible bond separately).
Calculate the income effect of the dividends on preferred shares.
Calculate Blossom’s basic EPS for 2020
Calculate the after-tax interest paid on the 8% bonds.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 5 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education