ACCT 304 Chapter 16 QUIZ
E16 25 EPS with Convertible Bonds and Preferred Stock On January 1 2012 Lindsey Company
issued 10-year, $3,000,000 face value, 6% bonds, at par. Each $1,000 bond is convertible into 15 shares
of Lindsey common stock. Lindsey- net income in 2013 was $240,000, and its tax rate was 40%. The
company had 100,000 shares of common stock outstanding throughout 2012. None of the bonds were
converted in 2012.
Instructions
(a) Compute diluted earnings per share for 2012.
(b) Compute diluted earnings per share for 2012, assuming the same facts as above, except that
$1,000,000 of 6% convertible preferred stock was issued instead of the bonds. Each $100 preferred
share is convertible into 5 shares of Lindsey common stock.
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