TRADITIONAL HOMEWORK ITEMS - FALL 2021 - ACT 3392

General Instructions for the Traditional Homework refer to the instructions for traditional item nos. 1 to 6.

16. (4 points) On 01-01-20, Fred had 3,456,000 shares of $1 par value common stock outstanding. On 03-31-20, Fred issued 360,000 shares of its common stock. On 05-01-20, Fred distributed a 10% common stock dividend. On 06-30-20, Fred issued 900,000 shares of its common stock. On 11-30-20, Fred purchased 2,400,000 shares of its common stock. Freds net income for the year ended 12-31-20 was $3,985,000 while Freds income tax rate during 2020 was 20%. During 2020, Fred declared and paid no cash dividends on its common stock.

As of 12-31-20, Fred had $6,000,000 of 5%, 10-year convertible bonds. Fred issued the bonds at par during 2019. The bonds can be converted into 48,000 shares of Freds common stock.

Throughout 2020, Fred had 480,000 outstanding employee stock options. Each option had an exercise price of $25 per share of Fred common stock. During the year ended 12-31-20, the average market price of Freds common stock was $30 per share.

What will Fred report as its basic earnings per share for the year ended 12-31-20?

What will Fred report as its diluted earnings per share for the year ended 12-31-20?

17. (4 points) On 01-01-20, Fred had 4,800,000 shares of $1 par value common stock outstanding. On 07-31-20, Fred issued 720,000 shares of its common stock. Freds net income for the year ended 12-31-20 was $10,050,000 while Freds income tax rate during 2020 was 24%. During 2020, Fred declared and paid $2 of cash dividends on its common stock.

As of 12-31-20, Fred had $40,000,000 of 4%, 10-year convertible bonds. Fred issued the bonds at par during 2017. The bonds can be converted into 400,000 shares of Freds common stock.

Throughout 2020, Fred had 240,000 outstanding employee stock options. Each option had an exercise price of $25 per share of Fred common stock. During the year ended 12-31-20, the average market price of Freds common stock was $21 per share.

What will Fred report as its basic earnings per share for the year ended 12-31-20?

What will Fred report as its diluted earnings per share for the year ended 12-31-20?

18. (4 points) Throughout 2020, Fred had 3,000,000 shares of $1 par value common stock outstanding. Throughout 2020, Fred had 400,000 shares of 5%, $100 par value convertible preferred stock outstanding. Each share of preferred stock can be converted into 3 shares of Freds $1 par value common stock. Freds net income for the year ended 12-31-20 was $3,221,000 while Freds income tax rate during 2020 was 20%. During 2020, Fred declared and paid no cash dividends on its common stock, however, Fred did declare and pay its preferred stock dividend.

As of 12-31-20, Fred had $6,000,000 of 5%, 10-year convertible bonds. Fred issued the bonds at par during 2019. The bonds can be converted into 48,000 shares of Freds common stock.

Throughout 2020, Fred had 480,000 outstanding employee stock options. Each option had an exercise price of $25 per share of Fred common stock. During the year ended 12-31-20, the average market price of Freds common stock was $30 per share.

What will Fred report as its basic earnings per share for the year ended 12-31-20?

What will Fred report as its diluted earnings per share for the year ended 12-31-20?

19. (4 points) On 01-01-20, Fred issued $5,000,000 of 4%, 5-year convertible bonds. At the time of issuance, the market rate for similar bonds was 4.5%. The bonds were dated 01-01-20 with interest payable January 01 and July 01. Fred incurred and paid $50,000 of bond issuance costs. On 01-01-22 after making its interest payments, 50% of the bonds were converted into 12,500 shares of Freds $1 par value common stock. At the time of the conversion, one share of Freds common stock was trading for $240 per share. Fred only prepares AJEs every December 31. Prepare the entries Fred should make on:

a. 01-01-20

b. 01-01-22

c. 07-01-24