Solution-Calculate the income effect of dividends on

Calculate the income effect of dividends on preferred shares

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Question - Blossom Inc. had net income for the fiscal year ended June 30, 2020, of $5,000,000. There were 500,000 common shares outstanding throughout 2020. The average market price of the common shares for the entire fiscal year was $80. Blossom's tax rate was 25% for 2020.

Blossom had the following potential common shares outstanding during 2020:

1. Options to buy 100,000 common shares at $40 per share.

2. 100,000 convertible preferred shares entitled to a cumulative dividend of $10 per share. Each preferred share is convertible into 1.5 common shares.

3. 7% convertible bonds with a principal amount of $36,700,000, issued at par. Each $1,000 bond is convertible into 25 common shares.

Required -

1. Calculate the income effect of the dividends on preferred shares.

2. Calculate the basic earnings per share for 2020.

Reference no: EM132813633

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Calculate the income effect of dividends on preferred shares

Reference no: EM132813633

Reference no: EM132813633

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