Solved by verified expert :Karen Company had 105,000 shares of common stock outstanding on
January 1, 2011. On August 30, 2011, Karen sold 50,000 shares of common stock
for cash. Karen also had 11,000 shares of convertible preferred stock
outstanding throughout 2011. The preferred stock is $105 par, 5%, and is
convertible into 4 shares of common for each share of preferred. Karen also had
400, 8%, convertible bonds outstanding throughout 2011. Each $1,000 bond is
convertible into 35 shares of common stock. The bonds sold originally at par.
Reported net income for 2011 was $350,000 with a 35% tax rate. The regular
common and preferred dividends were paid in 2011.
