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

question 50

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 issued on July 1.Each 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%.
Instructions: Write the EPS formula.Show all computations used in your solution.

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Definitions:

General Ledger

A complete record of all financial transactions over the life of a company, used to compile financial statements.

General Journal

A basic accounting ledger that records each financial transaction of a business in chronological order.

Transactions

The exchanges or transfers of goods, services, or funds between two or more parties.

Journal

An accounting record where all transactions are initially recorded using the double-entry bookkeeping system before their details are posted to accounts in the general ledger.