Question

During 2024. Angel Corporation had 1,000,000 shares of common stock and 60,000 shares of 7% preferred stock outstanding. The preferred stock does not have cumulative or convertible features. Angel declared and paid cash clividends of $470,000 and $235,000 to common and preferred shareholders, respectively, during 2024. On January 1,2023 . Angel issued $2,170,000 of convertible 6% bonds at face value. Each $1,000 bond is convertible into five common shares. Angel's net income for the year ended December 31, 2024, was $6,00 million. The income tax rate is 25% What will Angel report as cliluted earnings per share for 2024 , founded to the nearest cent? Multiple Choice None of these answer choices ore correct. 56.03 5570 55.94

Answer 1

Step-by-step explanation:

The diluted EPS of Angel Corporation for 2024 is 55.94.

Here are the steps to calculate the diluted EPS:

Calculate the basic EPS:

Net income = $6 million

Preferred dividends = $235,000

Number of common shares outstanding = 1,000,000

Basic EPS = $5,765,000 / 1,000,000 = $5.76

Calculate the number of common shares that would be outstanding if the convertible bonds were converted:

Number of bonds outstanding = $2,170,000 / $1,000 = 2,170

Number of common shares that could be converted = 2,170 * 5 = 10,850

Add the number of common shares that would be outstanding if the convertible bonds were converted to the number of common shares already outstanding:

Number of common shares outstanding = 1,000,000 + 10,850 = 1,010,850

Calculate the diluted EPS:

Net income = $6 million

Preferred dividends = $235,000

Tax rate = 25%

Number of common shares outstanding = 1,010,850

Diluted EPS = $4,982,500 / 1,010,850 = $5.59