1. On July 1, 2014, an interest payment date, $90,000 of Parks Co. bonds were converted into 1,800 shares of Parks Co. common stock each having a par value of $45 and a market value of $54. There is $3,600 unamortized discount on the bonds. Using the book value method, Parks would record
no change in paid-in capital in excess of par.
a $5,400 increase in paid-in capital in excess of par.
a $10,800 increase in paid-in capital in excess of par.
a $7,200 increase in paid-in capital in excess of par.
Question 2.2. In 2014, Eklund, Inc., issued for $103 per share, 70,000 shares of $100 par value convertible preferred stock. One share of preferred stock can be converted into three shares of Eklund’s $25 par value common stock at the option of the preferred stockholder. In August 2015, all of the preferred stock was converted into common stock. The market value of the common stock at the date of the conversion was $30 per share. What total amount should be credited to additional paid-in capital from common stock as a result of the conversion of the preferred stock into common stock?
Question 3.3. On December 31, 2014, Gonzalez Company granted some of its executives options to purchase 150,000 shares of the company’s $10 par common stock at an option price of $50 per share. The Black-Scholes option pricing model determines total compensation expense to be $1,125,000. The options become exercisable on January 1, 2015, and represent compensation for executives’ services over a three-year period beginning January 1, 2015. At December 31, 2015 none of the executives had exercised their options. What is the impact on Gonzalez’s net income for the year ended December 31, 2015 as a result of this transaction under the fair value method?
$ 375,000 increase.
$ 375,000 decrease.
Question 4.4. Hill Corp. had 600,000 shares of common stock outstanding on January 1, issued 900,000 shares on July 1, and had income applicable to common stock of $1,470,000 for the year ending December 31, 2014. Earnings per share of common stock for 2014 would be
Question 5.5. On December 31, 2014, Albacore Company had 300,000 shares of common stock issued and outstanding. Albacore issued a 10% stock dividend on June 30, 2015. On September 30, 2015, 12,000 shares of common stock were reacquired as treasury stock. What is the appropriate number of shares to be used in the basic earnings per share computation for 2015?
Question 6.6. Fultz Company had 300,000 shares of common stock issued and outstanding at December 31, 2014. During 2015, no additional common stock was issued. On January 1, 2015, Fultz issued 400,000 shares of nonconvertible preferred stock. During 2015, Fultz declared and paid $150,000 cash dividends on the common stock and $125,000 on the nonconvertible preferred stock. Net income for the year ended December 31, 2015, was $800,000. What should be Fultz’s 2015 earnings per common share, rounded to the nearest penny?
Question 7.7. On January 1, 2014, Jay Company had 10,000 shares of $1 par common stock outstanding, and 4,000 shares of $100 par value, 7% cumulative, nonconvertible preferred stock. On April 1, 2014, Jay Company had a 2-for-1 stock split. On July 1, 2014, Jay Company issued 5,000 additional shares of common stock.
What is the weighted average shares outstanding to be used in basic earnings per share for 2014?
Question 8.8. Regan Inc. had 400,000 shares of common stock issued and outstanding at December 31, 2014. On July 1, 2015 an additional 400,000 shares were issued for cash. Regan also had stock options outstanding at the beginning and end of 2015 which allow the holders to purchase 120,000 shares of common stock at $28 per share. The average market price of Regan’s common stock was $35 during 2015. The number of shares to be used in computing diluted earnings per share for 2015 is
Question 9.9. Fenton Co. had net income for 2014 of $400,000. The average number of shares outstanding for the period was 200,000 shares. The average number of shares under outstanding options, at an option price of $30 per share is 12,000 shares. The average market price of the common stock during the year was $36. What should Fenton Co. report for diluted earnings per share for the year ended 2014?
Leverage Corporation had net income for the year of $600,000 and a weighted average number of common shares outstanding during the period of 200,000 shares. The company has a convertible bond issue outstanding. The bonds were issued four years ago at par ($2,500,000), carry a 7% interest rate, and are convertible into 40,000 shares of common stock. The company has a 40% tax rate. Diluted earnings per share are
= (600000 + 2500000*7%*.6)/(200000+40000)
Question 11.11. Burnet Company had 30,000 shares of common stock outstanding on January 1, 2014. On April 1, 2014, the company issued 15,000 shares of common stock. The company had outstanding fully vested incentive stock options for 5,000 shares exercisable at $10 that had not been exercised by its executives. The end-of-year market price of common stock was $8 while the average for the year was $9. The company reported net income in the amount of $189,374 for 2014. What is the effect of the options on EPS?
The options will have no effect on EPS.
The options will dilute EPS by $.09 per share.
The options will dilute EPS by $.33 per share.
The options will dilute EPS by $.17 per share.
Question 12.12. On December 1, 2014, Lester Company issued at 103, five hundred of its 9%, $1,000 bonds. Attached to each bond was one detachable stock warrant entitling the holder to purchase 10 shares of Lester’s common stock. On December 1, 2014, the market value of the bonds, without the stock warrants, was 95, and the market value of each stock warrant was $50. The amount of the proceeds from the issuance that should be accounted for as the initial carrying value of the bonds payable would be
Question 13.13. Pacific Coast Inc. granted 15 million of its $1 par common shares to executives in 2014, subject to forfeiture if employment is terminated within the three year vesting period. The common shares have a market price of $8 per share on the grant date. Ignoring taxes, what is the Compensation Expense in 2015 related to this grant?
17. Worth Corporation declared and paid cash dividends in January of the current year to its common shareholders. The dividend
Will be added to the numerator of the earnings per share fraction for the current year.
Will be added to the denominator of the earnings per share fraction for the current year.
Will be subtracted from the numerator of the earnings per share fraction for the current year.