REQUIREMENTS: (1) Compute BASIC EARNINGS PER SHARE for 2003. (2) Compute DILUTED EARNINGS PER SHARE for 2003.
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The following is a partial balance sheet for Anderson Corp. for the year ended December 31, 2002:
9 percent Convertible Bonds (issued at par) - ₱1,800,000
Common Stock, 180,000 shares issued and outstanding, ₱50 par- ₱9,000,000
Additional Information:
(a) Each ₱1,000 convertible bond can be converted into 80 shares of common stock.
(b) On September 1, 2003, one-thirds of the convertible debt was converted into common stock.
(c) Anderson reported net income of ₱1,550,000 in 2003. The income tax rate was 30 percent.
(d) No other stock transactions took place during 2003.
REQUIREMENTS:
(1) Compute BASIC EARNINGS PER SHARE for 2003.
(2) Compute DILUTED EARNINGS PER SHARE for 2003.
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- On July 2, 2018, McGraw Corporation issued 500,000 of convertible bonds. Each 1,000 bond could be converted into 20 shares of the companys 5 par value stock. On July 3, 2020, when the bonds had an unamortized discount of 7,400 and the market value of the McGraw shares was 52 per share, all the bonds were converted into common stock. Required: 1. Prepare the journal entry to record the conversion of the bonds under (a) the book value method and (b) the market value method. 2. Compute the companys debt-to-equity ratio (total liabilities divided by total shareholders equity, as described in Chapter 6) under each alternative. Assume the companys other liabilities are 2 million and shareholders equity before the conversion is 3 million. 3. Assume the company uses IFRS and issued the bonds for 487,500 on July 2, 2018. On this date, it determined that the fair value of each bond was 930 and the fair value of the conversion option was 45 per bond. Prepare the journal entry to record the issuance of the bonds.Raun Company had the following equity items as of December 31, 2019: Preferred stock, 9% cumulative, 100 par, convertible Paid-in capital in excess of par value on preferred stock Common stock, 1 stated value Paid-in capital in excess of stated value on common stock| Retained earnings The following additional information about Raun was available for the year ended December 31, 2019: 1. There were 2 million shares of preferred stock authorized, of which 1 million were outstanding. All 1 million shares outstanding were issued on January 2, 2016, for 120 a share. The preferred stock is convertible into common stock on a 1-for-1 basis until December 31, 2025; thereafter, the preferred stock ceases to be convertible and is callable at par value by the company. No preferred stock has been converted into common stock, and there were no dividends in arrears at December 31, 2019. 2. The common stock has been issued at amounts above stated value per share since incorporation in 2002. Of the 5 million shares authorized, 3,580,000 were outstanding at January 1, 2019. The market price of the outstanding common stock has increased slowly but consistently for the last 5 years. 3. Raun has an employee share option plan where certain key employees and officers may purchase shares of common stock at 100% of the marker price at the date of the option grant. All options are exercisable in installments of one-third each year, commencing 1 year after the date of the grant, and expire if not exercised within 4 years of the grant date. On January 1, 2019, options for 70,000 shares were outstanding at prices ranging from 47 to 83 a share. Options for 20,000 shares were exercised at 47 to 79 a share during 2019. During 2019, no options expired and additional options for 15,000 shares were granted at 86 a share. The 65,000 options outstanding at December 31, 2019, were exercisable at 54 to 86 a share; of these, 30,000 were exercisable at that date at prices ranging from 54 to 79 a share. 4. Raun also has an employee share purchase plan whereby the company pays one-half and the employee pays one-half of the market price of the stock at the date of the subscription. During 2019, employees subscribed to 60,000 shares at an average price of 87 a share. All 60,000 shares were paid for and issued late in September 2019. 5. On December 31, 2019, there was a total of 355,000 shares of common stock set aside for the granting of future share options and for future purchases under the employee share purchase plan. The only changes in the shareholders equity for 2019 were those described previously, the 2019 net income, and the cash dividends paid. Required: Prepare the shareholders equity section of Rauns balance sheet at December 31, 2019. Substitute, where appropriate, Xs for unknown dollar amounts. Use good form and provide full disclosure. Write appropriate notes as they should appear in the publisher financial statements.Tama Companys capital structure consists of common stock and convertible bonds. At the beginning of 2019, Tama had 15,000 shares of common stock outstanding; an additional 4,500 shares were issued on May 4. The 7% convertible bonds have a face value of 80,000 and were issued in 2016 at par. Each 1,000 bond is convertible into 25 shares of common stock; to date, none of the bonds have been converted. During 2019, the company earned net income of 79,200 and was subject to an income tax rate of 30%. Required: Compute the 2019 diluted earnings per share.
- Grouper Company has bonds payable outstanding in the amount of $350,000, and the Premium on Bonds Payable account has a balance of $7,400. Each $1,000 bond is convertible into 20 shares of preferred stock of par value of $50 per share. All bonds are converted into preferred stock. Assuming that the book value method was used, what entry would be made?Fortune company had 300,000 ordinary shares outstanding on January 1, 20B. In addition on January 1, 20B, the entity had issued 6,000 convertible 10% bonds with P1,000 face value. The entity has no other potentially dilutive securities. The bonds were converted on October 1, 20B and 40 ordinary shares were issued in exchange for each bond. Accrued interest on the bonds was recognized and paid on that date. Net income for 20B was P7,500,000. The income tax rate is 30%. What is the amount of diluted earnings per share? 14.47 21.65 14.72 14.61At year-end, Lazy Company had 10,000 ordinary shares and 20,000 convertible preferenceshares outstanding in addition to 10%, convertible bonds payable in the face amount ofP2,000,000.During the current year, the entity paid dividends of P5 per share on the preference share.The preference share is convertible into 40,000 ordinary shares. The 9% bonds areconvertible into 30,000 ordinary shares.The net income for the current year was P2,410,000 and the income tax rate is 30%.Required:A. Compute the basic earnings per shareB. Compute the diluted earnings per share
- On December 31, 2001, Feterik Company had 7,000 shares of common stock issued and outstanding. On April 1, 2002, an additional 1,000 shares of common stock were issued and on July 1, additional 500 shares were issued. As of December 31, 2001 10, P1,000 maturity value, 8% convertible bonds were outstanding. Each bond is convertible into 40 shares of common stock. No bonds were converted into common stock in 2002. Assuming there are no antidilutive securities, what is the number of shares Feterik should use to compute diluted earnings per share for the year ended December 31, 2002? Choices; 8,000 8,100 8,500 8,400At December 31, 19x4, Back Company had 350,000 shares of common stock outstanding. On September 1, 19x5, an additional 150,000 shares of common stock were issued. In addition, Back had P10,000,000 of 8 percent convertible bonds outstanding at December 31, 19x4, which are convertible into 200,000 shares of common stock. The bonds were considered potential common shares at the time of their issuance and no bonds were converted into common stock in 19x5. The net income tax rate was 50 percent, what should be the diluted earnings per share for the year ended December 31, 19x5? (SHOW SOLUTION) a. P4.33 b. P5.00 c. P5.67 d. P7.50 If the accounts receivable turnover is five times, then the average number of days to collect accounts receivable is approximately: a. 50 days b. 65 days c. 70 days d. 91 daysRichmond Co. sold convertible bonds at a premium. Interest is paid on May 31 and November 30. On May 31, after interest was paid, 100, $1,000 bonds are tendered for conversion into 3,000 shares of $10 par value ordinary shares that had a market price of $40 per share. How should Richmond Co. account for the conversion of the bonds into ordinary shares under the book value method? Discuss the rationale for this method.
