2011 the company issued 1000 5-year 1000 face value bonds

Reference no: EM13578316

Use the below facts for each of years 2010,2011,2012 and 2013 to compute Basic EPS and Diluted EPS for 2013.

2010, a company issued 1,000 10-year $1,000 face value bonds at 101. The stated interest rate of the bonds is 6% and interest is paid semiannually. Each bond is convertible to 30 shares of common stock; this company also issued 100,000 shares of 6% cumulative preferred stock with a par value of $100 per share. Each share is convertible to 20 shares of common stock. The preferred stock is still outstanding at the end of 2013.

2011, the company issued 1,000 5-year $1,000 face value bonds at 98. The stated interest rate of the bonds is 15% and interest is paid semiannually. Each bond is convertible to 20 shares of common stock; This company also granted compensatory stock options to key executives. The options allow the executives to purchase 1,000,000 shares of common stock at $45 per share. The service period for the options is the three years beginning January 1, 2012.

2012, the company issued 10,000 common stock warrants that each allow holders to purchase 3 shares for $48 per share. They expire on December 31, 2014.

2013, began the year with 23,450,000 shares of common stock outstanding; issued 1,000 5-year $1,000 face value bonds at 105 on July 1, 2013. The stated interest rate of the bonds is 8% and interest is paid semiannually. Each bond is convertible to 20 shares of common stock; on March 15, this company issued 45,000 shares of common stock for $49 per share when the par value was $1. On June 30, this company purchased 30,000 shares of common stock for $50 per share; On September 15, this company declared a 3-for-1 stock split; for the year ended December 31, 2013, this company had net income of 280,000,000.

General Assumptions: all discounts and premiums on bonds payable are amortized on a straight-line basis; The tax rate for 2013 was 35%; the average stock price for 2013 was $58; all preferred stock dividends are paid in accordance with the preferred share agreement(s); Dividends of $1.15 per share were paid to common stockholders.

Reference no: EM13578316

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