Terrell Foods Reported $680,000 in Net Income (Not Considering Interest

question 100

Multiple Choice

Terrell Foods reported $680,000 in net income (not considering interest expense) and its weighted-average shares outstanding for the year is 100,000 shares. In prior years it sold $1,500,000 of 8% long-term convertible bonds at par which are still outstanding at the start of the year. The bonds are convertible into 40,000 shares of common stock. The tax rate for all years is 40%. Bondholders convert the bonds on July 1 of the current year. If Terrell has no other potentially dilutive securities and no preferred stock, what is the denominator for basic and diluted EPS?

• A) basic 120,000; diluted 140,000
• B) basic 100,000; diluted 140,000
• C) basic 140,000; diluted 140,000
• D) basic 100,000; diluted 120,000

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Definitions:

Productive Resources

Includes the inputs used in the production of goods and services, such as labor, capital, and natural resources.

Per Capita Water Use

The average amount of water consumed per person in a given area or community within a specified time period.

Demographic Transition

A model describing the transformation of a country from high birth and death rates to low birth and death rates as it develops economically, leading to a stable population size.

Birthrates

The number of live births per thousand people in a population over a given period of time.