Carla Vista Corporation issued $5 million of 10–year, 8%
callable convertible subordinated debentures on January 2, 2020.
The debentures have a face value of $1,000, with interest payable
annually. The current conversion ratio is 14:1, and in two years it
will increase to 19:1. At the date of issue, the bonds were sold at
98 to yield a 8.3021% effective interest rate. Bond discount is
amortized using the effective interest method. Carla Vista’s
effective tax was 40%. Net income in 2020 was $7.7 million, and the
company had 2.4 million shares outstanding during the entire year.
For simplicity, ignore the IFRS requirement to record the
debentures’ debt and equity components separately.
(a)
Calculate both basic and diluted earnings per share for the year
ended December 31, 2020.
Basic earnings per share | $ | |
Diluted earnings per share |
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