So we had our final exams a while ago and one of the problems was something like this, "XYZ Corporation has 400,000 common shares outstanding and has 40,000 $7 Convertible Preference Shares. Each preference share can be converted to 4 shares of common stock. Dividends were declared and paid during the year.
The following transactions occured:
1. Sold 200,000 shares.
2. Declared 100% stock dividends.
3. Sold 200,000 shares.
4. Purchased 60,000 shares for treasury.
The corporation reported a loss of $607,760. Find the basic earnings/loss per share."
I was confused about whether I should convert the preference shares or not. The shares are convertible but there was no stated transaction. In the exam, I didn't convert the preference shares. I left them as is.
My question is: Should I have converted the shares, even when there was no transaction for it? Or did I do the right thing?
The following transactions occured:
1. Sold 200,000 shares.
2. Declared 100% stock dividends.
3. Sold 200,000 shares.
4. Purchased 60,000 shares for treasury.
The corporation reported a loss of $607,760. Find the basic earnings/loss per share."
I was confused about whether I should convert the preference shares or not. The shares are convertible but there was no stated transaction. In the exam, I didn't convert the preference shares. I left them as is.
My question is: Should I have converted the shares, even when there was no transaction for it? Or did I do the right thing?
Last edited: