Convertible Preferred Stock, Convertible Bonds, and EPS
Francis Company has 16,800 shares of common stock outstanding at the beginning of 2013. Francis issued 2,100 additional shares on May 1 and 1,400 additional shares on September 30. It also has two convertible securities outstanding at the end of 2013. These are:
- Convertible preferred stock: 1,750 shares of 8.0%, $50 par, preferred stock were issued on January 2, 2010, for $55 per share. Each share of preferred stock is convertible into 2 shares of common stock. Current dividends have been declared and paid. To date, no preferred stock has been converted.
- Convertible bonds: Bonds with a face value of $175,000 and an interest rate of 5.0% were issued at par in 2012. Each $1,000 bond is convertible into 20 shares of common stock. To date, no bonds have been converted.
Francis earned net income of $80,000 during 2013. The income tax rate is 30%.
4b. Show how the basic EPS you calculated should be reported to shareholders. You do not have to calculate diluted EPS.