Reference no: EM132529933

Question 1 - Yexas Instruments reported $7,000,000 in net income for the current year. The company had $7,000,000 of 9% cumulative, non-convertible preferred stock outstanding all year, and issued $5,000,000 of 7% convertible bonds on May 1. Each $1,000 bond is convertible into 40 shares of common stock. Common shares outstanding all year were 2,000,000. Compute both basic and diluted EPS when the tax rate is 40%.

Question 2 - Pauline reported $7,000,000 in net income for the current year. The company had $6,000,000 of 8% cumulative, non-convertible preferred stock outstanding all year, and issued $10,000,000 of 7% convertible bonds on July 1. Each $1,000 bond is convertible into 30 shares of common stock. Common shares outstanding at the beginning of the year was 1,000,000, but on December 15, the company declared a 2 for 1 stock split. Compute both basic and diluted EPS when the tax rate is 40%.