Ace Corporation has 10,000 shares of $100, 5%, convertible preferred shares outstanding for the whole year. Each preferred share is convertible into 2 shares of common stock. What is the incremental income per common share from the preferred stock?

Question

Quizplus · Accepted Answer

The preferred dividend is $50,000 (10,000 shares x $100 x 5%). If converted, 20,000 common shares would be issued (10,000 shares x 2). The incremental income per common share is $50,000 / 20,000 shares = $2.50.

Ace Corporation Has 10,000 Shares of $100, 5%, Convertible Preferred