Question

18. On June 30, Megan Corp. incurred a $160,000 net loss from disposal of a component....

18. On June 30, Megan Corp. incurred a $160,000 net loss from disposal of a component. Also on June 30, Megan paid $120,000 for property taxes assessed for the calendar year. What amount of the foregoing items should be included in the determination of Megan’s net income or loss for the six-month interim period ended June 30?

19.The Matthew Company had a net income of $500,000 for the year, and 100,000 shares of common stock outstanding. Matthew did not have any preferred stock outstanding. The Company had 10,000 stock options outstanding. The exercise price of each option is $10 a share. The average market price of common stock for the year was $5 a share, and the year-end market price was $7 a share. What is the diluted earnings per share?

21.On January 2, 2019, Worley Co. issued at par $50,000 of convertible bonds. [The bonds had an interest rate equal to your last digit of your Sam Houston ID number. If your ID number ends in a 0, use 10% as the interest rate on the convertible bonds.] These bonds can be converted, in total, into 5,000 shares of Worley's common stock. No bonds were converted during 2019. Throughout 2019, Worley had 5,000 shares of common stock outstanding. Worley's 2019 net income was $5,000. Worley's income tax rate is 20 percent. No potentially dilutive securities other than the convertible bonds were outstanding during 2019. Worley's diluted earnings per share for 2019 would be

Homework Answers

Answer #1

1. Computation of net income/ loss:

Net Loss from disposal of a component $ -160,000
Property Taxes paid (equivalent to interim period ie 6 months ) (120000*6/12) $ -60,000
Total Loss $ (220,000)

2. Net income = $ 500,000

Equivalent outstanding shares= 100,000+10,000 = 110,000

So diluted EPS = 500,000/110,000 = $ 4.55

3. Net income = $ 5000

Interest paid = $ 50000*10% = $ 5000

Tax rate = 20%

Equivalent outstanding shares= 5000 + 5000 (convertible) = 10,000

So diluted EPS => net income+Interest(1-tax)}/equivalent o/s shares

ie, => (5000+(5000(1-0.2)))/10,000 = $ 0.90

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