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

question 58

Multiple Choice

Baker Instruments reported $7,000,000 in net income for the current year. The company had $500,000 of 10% cumulative, non-convertible preferred stock outstanding all year, and issued $1,000,000 of 6% convertible bonds on June 1. Determine the numerator for both basic and diluted EPS when the tax rate is 40%.

• A) basic EPS $7,000,000 - $50,000; diluted EPS $7,000,000 - $50,000 + ($60,000 × 5/12)(1 - .40)
• B) basic EPS $7,000,000 - $50,000; diluted EPS $7,000,000 - $50,000 + ($60,000 × 7/12)(1 - .40)
• C) basic EPS $7,000,000 - $50,000 (7/12); diluted EPS $7,000,000 - $50,000 (7/12) + ($60,000 × 7/12)(1 - .40)
• D) basic EPS $7,000,000 - $50,000 (5/12); diluted EPS $7,000,000 - $50,000 (5/12) + ($60,000 × 5/12)(1 - .40)

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Definitions:

Partners' Liability

The legal responsibility shared by partners in a partnership for the debts and obligations of the business.

Convict On Parole

An individual who has been released from prison before completing their sentence under certain conditions for good behavior.

Criminal Codes

A compilation of laws and statutes that define acts punishable by the state, including crimes and the penalties for their commission.

Partnership

A business arrangement that is legally recognized, involving two or more partners who jointly manage the business and divide its profits.