Smith Instruments Reported $6,000,000 in Net Income for the Current

question 80

Multiple Choice

Smith Instruments reported $6,000,000 in net income for the current year. The company had $500,000 of 10% cumulative, non-convertible preferred stock outstanding all year, and issued $5,000,000 of 6% convertible bonds on June 1. Each $1,000 bond is convertible into 40 shares of common stock. 400,000 common shares were outstanding all year. Determine the denominator for both basic and diluted EPS when the tax rate is 40%.

• A) basic EPS 400,000; diluted EPS 400,000 + (5,000 × 40) (5/12)
• B) basic EPS 400,000 (7/12); diluted EPS 400,000 + (5,000 × 40) (7/12)
• C) basic EPS 400,000; diluted EPS 400,000 + (5,000 × 40) (7/12)
• D) basic EPS 400,000 (5/12); diluted EPS [400,000 + (5,000 × 40)] (5/12)

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Definitions:

Anger

A strong feeling of annoyance, displeasure, or hostility; an emotional response to perceived provocation or threat.

Surprise

An emotional state or reaction caused by an unexpected event, which can vary in intensity from mild interest to shock.

Happiness

An emotional state ranging from simple satisfaction to deep happiness, defining a sense of completeness and pleasure.

Emotional Illiteracy

The inability to recognize, understand, and appropriately express one's emotions.