The information below pertains to Blue Company for 2018. $1,140,000 1,900,000 Net income for the year 6% convertible bonds issued at par ($1,000 per bond); each bond is convertible into 20 shares of common stock 6% convertible, cumulative preferred stock, $100 par value; each share is convertible into 5 shares of common stock Tax rate for 2018 Average market price of common stock 3,870,000 40% $25 per share There were 570,000 shares of shares of common stock outstanding on 1/1/2018. On April 1, 2018, the company issued 40,000 common shares. There were no changes in the number of preferred shares, or convertible bonds outstanding. There was no treasury stock. The company also has common stock options (granted in a prior year) to purchase 70,500 shares of common stock at $20 per share. Required: 1. Compute basic earings per share for 2018. 2. Compute diluted earnings per share for 2018. Accounting records for Crane Inc. show the following data for 2017. (a) Deferred tax asset at the beginning of 2017 was $6,000; (b) Deferred tax liability at the beginning of 2017 was $37,500; n revenues recognized on the book were $1,000,000 in 2017 and their corresponding amounts on the tax were $850,000; (d) Equipment was acquired on 1/1/2017 for $500,000. Straight-line depreciation over a 5-year life, with no salvage value, is used for book purposes. For tax purposes, Sarasota used a 30% rate to calculate depreciation in 2017, (e) Product warranties were estimated to be $48,700 in 2017. Actual repair and labor costs related to the warranties in 2017 were $9,500. The remainder is estimated to be paid evenly in 2018 and 2019; (1) Fines for pollution violation of $75,000 were recorded as an expense on the book; (g) Life insurance expense for CEO was $12,500; (h) Taxable income in 2017 is $1,250,000; (i) Enacted tax rates are 30% for 2016-2017. In 2017, tax rates for 2018 and after are changed to 35%. Required: 1. What is Bridgeport's pretax financial income in 2017? (6 points). Hint: If you have two future taxables (deductibles), combine them to calculate deferred tax liability (deferred tax asset). Prior Yrs Current Yr Future Yr1 Future Yr2 Future Yr3 Pretax fin. income (Book income GAAP) Taxable income (Tax income IRS) Tax rate Income tax payable Desired ending balance Beginning balance Change 2. Prepare a journal entry for 2017 to record income tax expense (3 points). 3. Complete the following partial income statement (1 point). Crane Inc. Income Statement (Partial) For the Year Ended on December 31, 2017 Income before income tax The information below pertains to Blue Company for 2018. $1,140,000 1,900,000 Net income for the year 6% convertible bonds issued at par ($1,000 per bond); each bond is convertible into 20 shares of common stock 6% convertible, cumulative preferred stock, $100 par value; each share is convertible into 5 shares of common stock Tax rate for 2018 Average market price of common stock 3,870,000 40% $25 per share There were 570,000 shares of shares of common stock outstanding on 1/1/2018. On April 1, 2018, the company issued 40,000 common shares. There were no changes in the number of preferred shares, or convertible bonds outstanding. There was no treasury stock. The company also has common stock options (granted in a prior year) to purchase 70,500 shares of common stock at $20 per share. Required: 1. Compute basic earings per share for 2018. 2. Compute diluted earnings per share for 2018. Accounting records for Crane Inc. show the following data for 2017. (a) Deferred tax asset at the beginning of 2017 was $6,000; (b) Deferred tax liability at the beginning of 2017 was $37,500; n revenues recognized on the book were $1,000,000 in 2017 and their corresponding amounts on the tax were $850,000; (d) Equipment was acquired on 1/1/2017 for $500,000. Straight-line depreciation over a 5-year life, with no salvage value, is used for book purposes. For tax purposes, Sarasota used a 30% rate to calculate depreciation in 2017, (e) Product warranties were estimated to be $48,700 in 2017. Actual repair and labor costs related to the warranties in 2017 were $9,500. The remainder is estimated to be paid evenly in 2018 and 2019; (1) Fines for pollution violation of $75,000 were recorded as an expense on the book; (g) Life insurance expense for CEO was $12,500; (h) Taxable income in 2017 is $1,250,000; (i) Enacted tax rates are 30% for 2016-2017. In 2017, tax rates for 2018 and after are changed to 35%. Required: 1. What is Bridgeport's pretax financial income in 2017? (6 points). Hint: If you have two future taxables (deductibles), combine them to calculate deferred tax liability (deferred tax asset). Prior Yrs Current Yr Future Yr1 Future Yr2 Future Yr3 Pretax fin. income (Book income GAAP) Taxable income (Tax income IRS) Tax rate Income tax payable Desired ending balance Beginning balance Change 2. Prepare a journal entry for 2017 to record income tax expense (3 points). 3. Complete the following partial income statement (1 point). Crane Inc. Income Statement (Partial) For the Year Ended on December 31, 2017 Income before income tax