Answered step by step
Verified Expert Solution
Question
1 Approved Answer
hi i'm taking intermediate accounting II class and i would like to know if i can get help from you guys to do the homework
hi
i'm taking intermediate accounting II class and i would like to know if i can get help from you guys to do the homework exercises?
Dilutive Securities and EPS Exam Only Fall 2016. Each question is equally weighted. Show all work for partial credit. Label each part carefully. Use Excel and appropriate formulas. Failure to use formulas will result in lost points. 1. Convertible Bonds. Great Co. issued $4,000,000 of 12%, 5-year convertible bonds on December 1, 2014 for $4,016,900 plus accrued interest. The bonds were dated April 1, 2014 with interest payable April 1 and October 1. Bond premium is amortized each interest period on a straightline basis. Garr Co. has a fiscal year end of September 30. On October 1, 2015, $2,000,000 of these bonds were converted into 28,000 shares of $15 par common stock. Accrued interest was paid in cash at the time of conversion. Instructions (a) Prepare the entry to record the interest expense at April 1, 2015. Assume that interest payable was credited when the bonds were issued (round to nearest dollar). (b) Prepare the entry to record the conversion on October 1, 2015. Assume that the entry to record amortization of the bond premium and interest payment has been made. 2. 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, 2015, Lazy Corporation called its 10% convertible bonds for conversion. The $7,000,000 par bonds were converted into 280,000 shares of $20 par common stock. On August 1, there was $700,000 of unamortized premium applicable to the bonds. The fair value of the common stock was $20 per share. Ignore all interest payments. 2. Dark, Inc. decides to issue convertible bonds instead of common stock. The company issues 10% convertible bonds, par $3,000,000, at 97. The investment banker indicates that if the bonds had not been convertible they would have sold at 94. 3. Zemog Company issues $8,000,000 of bonds with a coupon rate of 8%. To help the sale, detachable stock warrants are issued at the rate of ten warrants for each $1,000 bond sold. It is estimated that the value of the bonds without the warrants is $7,896,000 and the value of the warrants is $504,000. The bonds with the warrants sold at 101. 3. Stock options. Prepare the necessary entries from 1/1/14-2/1/16 for the following events using the fair value method. If no entry is needed, write "No Entry Necessary." 1. On 1/1/14, the stockholders adopted a stock option plan for top executives whereby each might receive rights to purchase up to 18,000 shares of common stock at $40 per share. The par value is $10 per share. 2. On 2/1/14, options were granted to each of five executives to purchase 18,000 shares. The options were non-transferable and the executive had to remain an employee of the company to exercise the option. The options expire on 2/1/16. It is assumed that the options were for services performed equally in 2014 and 2015. The Black-Scholes option pricing model determines total compensation expense to be $1,900,000. 3. At 2/1/16, four executives exercised their options. The fifth executive chose not to exercise his options, which therefore were forfeited. 4. Weighted average shares outstanding. On January 1, 2015, Nerraw Corporation had 1,000,000 shares of common stock outstanding. On March 1, the corporation issued 150,000 new shares to raise additional capital. On July 1, the corporation declared and issued a 2-for-1 stock split. On October 1, the corporation purchased on the market 500,000 of its own outstanding shares and retired them. Instructions Compute the weighted average number of shares to be used in computing earnings per share for 2015. 5. Stock appreciation rights. On January 1, 2013, Oreo Co. established a stock appreciation rights plan for its executives. They could receive cash at any time during the next four years equal to the difference between the market price of the common stock and a preestablished price of $16 on 400,000 SARs. The market price is as follows: 12/31/13$21; 12/31/14$18; 12/31/15$19; 12/31/16$20. On December 31, 2015, 65,000 SARs are exercised, and the remaining SARs are exercised on December 31, 2016. Instructions (a) Prepare a schedule that shows the amount of compensation expense for each of the four years starting with 2013. (b) Prepare the journal entry at 12/31/14 to record compensation expense. (c) Prepare the journal entry at 12/31/16 to record the exercise of the remaining SARs. 6. Earnings per share. Nosloc Corp. had $700,000 net income in 2015. On January 1, 2015 there were 200,000 shares of common stock outstanding. On April 1, 20,000 shares were issued and on September 1, Nosloc bought 30,000 shares of treasury stock. There are 30,000 options to buy common stock at $40 a share outstanding. The market price of the common stock averaged $50 during 2015. The tax rate is 40%. During 2015, there were 40,000 shares of convertible preferred stock outstanding. The preferred is $100 par, pays $3.50 a year dividend, and is convertible into three shares of common stock. Nosloc issued $2,000,000 of 8% convertible bonds at face value during 2014. Each $1,000 bond is convertible into 30 shares of common stock. Instructions Compute BASIC and DILUTED earnings per share for 2015. Show all computations
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started