1. Convertible bonds and stock warrants.

For each of the unrelated transactions described below, present the entry (ies)required to record the bond transactions.

1. On August 1, 2018, Lane corporation called its 10% convertible bonds for conversion. The $8,000,000 par bonds were converted into 320,000 shares of $20 par common stock. On August 1, there was 800,000 of unamortized premium applicable to the bonds. The fair value of the common stock was $20 per share. Ignore all interest payments.

2. Packard Inc. decides to issue convertible bonds instead of common stock. The company issues 10% convertible bonds, par $4,000,00, at 97. The investment banker indicates that if the bonds had not been convertible they would have sold at 94.

3. Gomez company issues $9,000,000 of bonds with a coupon rate of 8%. To help the sale, detachable stock warrants are issued at the rate of 10 warrants for each $1,000 bond sold. It is estimated that the value of the bonds without the warrants is $8,883,000and the value of the warrants is $567,000. The bonds with the warrants sold at 101

2. Earnings Per Share.

Santana corporation has 400,000 shares of common stock outstanding throughout 2018. In addition, the corporation has 5,000, 20-year, 9% bonds issued at par in 2016. Each $1,000 bond is convertible into 20 shares of common stock after 9/23/19. During the year 2018, the corporation earned $900,000 after deducting all expenses. The tax rate was 30%.

Instructions

Compute the proper earnings per share for 2018.