Medical Instruments Reported $7,000,000 in Net Income for the Current

question 54

Essay

Medical Instruments reported $7,000,000 in net income for the current year. The company had $6,000,000 of 8% cumulative, non-convertible preferred stock outstanding all year, and issued $10,000,000 of 7% convertible bonds on July 1. Each $1,000 bond is convertible into 30 shares of common stock. Common shares outstanding at the beginning of the year was 1,000,000, but on December 15, the company declared a 2 for 1 stock split. Compute both basic and diluted EPS when the tax rate is 40%.

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Definitions:

Experimental Group

The group in a scientific study that receives the treatment or intervention being tested, as opposed to the control group which does not.

Control Group

In an experimental study, group of subjects whose experience resembles that of the experimental group in all ways except that they do not receive the key manipulation.

Wait List Control

A research method where participants are assigned to a waiting list and receive the intervention after the active treatment group, used as a control condition in studies.

Obsessive-Compulsive

Pertaining to a pattern of unwanted thoughts and fears (obsessions) that lead to repetitive behaviors (compulsions).