Reference no: EM133173609

Question - Diluted EPS - Chrissy Corporation had the following securities outstanding at its fiscal year end December 31, 20X7:

1. 200,000 Options: $11 exercise price; each option allows for the purchase of one share.

2. Common Shares, no par; authorized 5,000,000 shares; issued and outstanding 600,000 shares.

3. 7.5% Convertible Bonds, par value $2,500,000. The bonds were issued this year on May 1, 20X7.

4. Preferred Shares, cumulative, convertible, $1.25 dividend per quarter, no-par. Authorization limit 100,000; issued and outstanding 25,000 shares. Issued this year on October 1, 20X7.

Other Information for 20X7:

1. Options were outstanding all year to purchase 200,000 common shares at $11 per share

2. 20X7 net earnings were $790,000.

3. Interest expense was $216,000 on the 6% bonds.

4. The preferred shares are convertible into common shares at a rate of 9 common shares for 1 preferred share.

5. The 7.5% convertible bonds are convertible at a rate of seven shares for each $100 bond.

6. The tax rate is 35%

7. Common shares traded for an average of $32 during the year.

8. No dividends were declared in 20X7.

9. No common shares were issued or retired during the year.

NOTE: round all dollars to two decimal places. Round all share amounts to the nearest whole share

Required -

1. Calculate basic EPS for the 2017 year.

2. Test each security for dilution and identify each as dilutive or anti-dilutive. If options are dilutive, show the calculation of new shares issued. SHOW ALL CALCULATIONS.

3. Prepare a cascade worksheet to show the calculation of diluted EPS, beginning with basic EPS.