Calculate the Income Effect on the Incremental EPS for the Following

question 74

Multiple Choice

Calculate the income effect on the incremental EPS for the following instrument: $$\begin{array}{l}\begin{array} { | l | r | } \hline \text { Convertible bonds outstanding, yield of } 8 \% \text { and }\\\text { coupon rate of } 8 \% & \$ 5,000,000 \\\hline \text { Issue date } & \text { January } 1,2015 \\\hline \text { Maturity date } & \text { December } 31,2022 \\\hline \text { Conversion rate for each } \$ 1,000 \text { bond } & \text { 25 ordinary shares } \\\hline \text { Income tax rate } & 30 \% \\\hline\end{array}\end{array}$$

• A)$0.96
• B)$2.24
• C)$120,000
• D)$280,000

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Definitions:

Wages Expense

It represents the total amount of monetary compensation, bonuses, and the value of non-cash benefits that a company pays to its employees during a specific period.

Prepaid Rent Account

An asset account on the balance sheet representing rent payments made in advance of the rental period to which they relate.

Accrue Revenue Earned

The process of recording revenue that has been earned but not yet received in cash or billed to the client.

Financial Statements

Reports that summarize the financial performance, position, and cash flows of a business over a specific period.