1.The stockholders' equity section at the beginning of the year have the following balances.

$3,000,000Common stock, $10 par, authorized 1,000,000 shares, 300,000 shares issued and outstanding

$600,000Paid-in capital in excess of par - common stock

$570,000Retained earnings

Using the attached T-account template:

Record the balances indicated above. Label the balances "Bal".

Prepare entries, if necessary, to recognize the following transactions, which occurred during the current year:

a.The company issued to the stockholders 100,000 rights. Ten rights are needed to buy one share of stock at $32. The rights were void after 30 days. The average market price of the stock during the 30 days was $34 per share.

b.The company sold to the public a $200,000, 10% bond issue at 104. The company also issued, with each $100 bond, one detachable stock purchase warrant, which provided for the purchase of common stock at $30 per share. Shortly after issuance, similar bonds, without warrants, were selling at $96 and warrants were selling at $8.

c.During the year, 95,000 of the rights issued in (a) above were exercised within 30 days.

d.At the end of the year, 80% of the warrants in (b) above had been exercised, and the remaining were outstanding and in good standing.

e.During the current year, the company granted stock options for 10,000 shares of common stock to company management executives. The company, using a fair value option-pricing model, determined that each option is worth $10. The option price is $30. The options were designated to expire at year-end and were considered compensation expense for the year.

f.During the current year, 9,000 shares, related to the stock-option plan, were exercised. The expiration of 1,000 shares resulted because one of the executives failed to fulfill an obligation related to the employment contract.

2.The following activities occurred for the NNN Company:

11/30/16Adopted a stock-option plan that provided that 70,000 shares of $5 par value stock be designated as available for the granting of options to officers of the corporation at a price of $9 per share. The market price was $12 per share on 11/30/16.

1/2/17Options to purchase 28,000 shares were granted to the president as follows:

15,000 shares for services to be rendered in 2017

13,000 shares for services to be rendered in 2018

Options to purchase 14,000 shares were granted to the vice president as follows:

7,000 shares for services to be rendered in 2017

7,000 shares for services to be rendered in 2018

The market price of the stock was $14 per share. The options were exercisable for a period of one year following the year in which the services were rendered. The fair value of the options on the grant date (1/2/17) was $4 per option.

2018During 2018, neither the president nor the vice president exercised their options because the market price of the stock was below the exercise price.

12/31/18The market price of the stock was $8 per share on 12/31/18, when the options for 2017 lapsed.

12/31/19Both the president and vice president exercised their options for 13,000 and 7,000 shares, respectively, when the market price was $16 per share.

Using the attached T-account template:

Prepare the necessary entries, if any, to recognize the following:

a.2016 stock option plan adoption

b.2017 stock options granted

c.2018 stock options lapsed

d.2019 stock options exercised

Label your entry(ies) with the year and an entry number. For example, if there are two entries in 2018, label the first one "2018-1" and the second entries "2018-2"

3.The following information is available to the controller who is preparing a schedule to verify the weighted-average number of shares to be used in the year-end computation of EPS.

1/1/2016The company had 120,000 shares of stock outstanding

5/1/2016The company issued an additional 60,000 shares

7/1/2016The company purchased 10,000 treasury shares

10/1/2016The company sold the 10,000 treasury shares

Compute the weighted-average shares.

Display and label the details of your calculation.

4.The information below pertains to the XYZ Company for 2016.

1

Net income for the year

1,200,000

2

7% convertible bonds issued at par ($1,000 per bond); each bond is convertible into 30 shares of common stock

2,000,000

3

6% convertible, cumulative preferred stock, $100 par value; each share is convertible into 3 shares of common stock

4,000,000

4

Common stock, $10 par value

6,000,000

5

Tax rate for the year

40%

6

Average per share market price of common stock

$25

7

There were no changes during the year in the number of common shares, preferred shares, or convertible bonds outstanding.

8

There is no treasury stock.

9

The company has common stock options (granted in a prior year to key executives) to purchase 75,000 shares of common stock at $20 per share

a.Calculate basic earnings per share (EPS) for 2016:

Display and label the details of your calculation.

b.Calculate diluted earnings per share (EPS) for 2016:

Display and label the details of your calculation.