Question
ON JANUARY 1, 1999 PEANUT PURCHASED 800 OF THE 1000 SHARES OF BUTTER STOCK AT BOOK VALUE PEANUT AND BUTTER HAVE NO INTERCOMPANY DEALINGS AND BUTTER DOES NOT PAY DIVIDENDS INFORMATION FOR 2016 ARE AS FOLLOWS:
INCOME STATEMENTS
PEANUT BUTTER
REVENUE 800,000 250,000
COST OF GOODS SOLD 300,000 80,000
INTEREST EXP 0 40000
INVESTMENT INCOME 0 0
INCOME TAX 30% 150000 39000
INCOME 350000 91,000
PARTIAL BALANCE SHEET
CONVERTIBLE BONDS 0 400,000
COMMON STOCK $1 PAR 90,000 1000
Required:
A) THE 10% CONVERTIBLE BONDS CAN BE CONVERTED INTO 50 TOTAL SHARES OF BUTTER STOCK MAKING THEM ANTI-DILUTIVE. DETERMINE THE EPS OF PEANUT.
B) THE 10% CONVERTIBLE BONDS CAN BE CONVERTED INTO 500 TOTAL SHARES OF BUTTER MAKING THEM DILUTIVE. DETERMINE THE EPS OF PEANUT.
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