Reference no: EM132635802

Question -

1. Terry Company has 24,000 shares of common stock outstanding at the beginning of 2016. Terry issued 3,000 additional shares on May 1 and 2,000 additional shares on September 30. It also has two convertible securities outstanding at the end of 2016. These are: Convertible preferred stock: 2,500 shares of 8.5%, $50 par, preferred stock were issued on January 2, 2013, for $60 per share. Each share of preferred stock is convertible into 3 shares of common stock. Current dividends have been declared and paid. To date, no preferred stock has been converted.

2. Convertible bonds: Bonds with a face value of $250,000 and an interest rate of 5.5% were issued at par in 2015. Each $1,000 bond is convertible into 20 shares of common stock. To date, no bonds have been converted.

Terry earned net income of $72,500 during 2016. The income tax rate is 30%.

What are the number of shares of common stock that Terry should use in calculating basic earnings per share for 2016.

What are the basic earnings per share for 2016?

What are diluted earnings per share for 2016?

What are the incremental EPS of the preferred stock and convertible bonds?

Based on the information above except that net income included a loss from discontinued operations of $18,000 net of income taxes.

What are is the new basic EPS?

Explain how the basic EPS calculated should be reported to shareholders.