Question 1

A) Harris Pilton had 5,000,000 common shares in issue on January 1, 2018. On March 1, the company issued 100,000 new shares. On May 1 the company made a 3 for 2 bonus issue. On July 1, the company issued 500,000 new shares at the market price of $60.00. On September 1, the company repurchased 50,000 shares. On October 1, the company issued a 20% stock dividend. The companys year-end is 31 December. Its profit after tax is $8,000,000. The tax rate is 30%. The company also has 2,000, $100 par, 5% nonconvertible, cumulative preferred stock in issue. Dividends were not declared for the period.

Instructions

1- Calculate the weighted average number of common shares outstanding

2- Calculate basic earnings per share for the period.

B) On January 1, 2017, Bonobo Co. issued $20,000,000 of 10% bonds due in 10 years. Each $1,000 bond is convertible into two shares of the firms $0.50 par value common stock. The bonds were issued at 98. On January 1, 2020, when the stock was selling for $200 per share, holders of 40% of the convertible bonds exercised their conversion options. Straight-line amortization is used for bond discounts or premiums.

Instructions

Prepare the necessary journal entries for the conversion of the bonds