Concept explainers
Consolidated earnings per share:is calculated in the same way as earnings per share is calculated in a single corporation. Consolidated earnings per share is based on the income attributed to the controlling interest and available to parent’s common stock. Basic consolidated EPS is calculated by deducting income to the non-controlling interest and any preferred dividends requirement of the parent company from consolidated net income. The resulting amount is then divided by the weighted-average number of the parent’s common shares outstanding during the period. In computation of EPS, the parent’s percentage of ownership changes frequently when subsidiary convertible bonds and preferred stock are treated as common stock and subsidiary options and warrants are treated as if they had been exercised, in addition income available to subsidiary common shareholders also changes.
computation of basic anddiluted EPS, for the consolidated entity for 20X4.
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Chapter 10 Solutions
ADVANCED FINANCIAL ACCOUNTING IA
- Selected transactions completed by Equinox Products Inc. during the fiscal year ended December 31, 2016, were as follows: a. Issued 15,000 shares of 20 par common stock at 30, receiving cash. b. Issued 4, 000 shares of 80 par preferred 5% stock at 100, receiving cash. c. Issued 500,000 of 10-year, 5% bonds at 104, with interest payable semiannually. d. Declared a quarterly dividend of 0.50 per share on common stock and 1.00 per share on preferred stock. On the date of record, 100,000 shares of common stock were outstanding, no treasury shares were held, and 20,000 shares of preferred stock were outstanding. e. Paid the cash dividends declared in (d). f. Purchased 7,500 shares of Solstice Corp. at 40 per share, plus a 150 brokerage commission. The investment is classified as an available-for-sale investment. g. Purchased 8,000 shares of treasury common stock at 33 per share. h. Purchased 40,000 shares of Pinkberry Co. stock directly from the founders for 24 per share. Pinkberry has 125,000 shares issued and outstanding. Equinox Products Inc. treated the investment as an equity method investment. i. Declared a 1.00 quarterly cash dividend per share on preferred stock. On the date of record, 20,000 shares of preferred stock had been issued. j. Paid the cash dividends to the preferred stockholders. k. Received 27,500 dividend from Pinkberry Co. investment in (h). l. Purchased 90,000 of Dream Inc. 10-year, 5% bonds, directly from the issuing company, at their face amount plus accrued interest of 37 5. The bonds are classified as a held-to-maturity long -term investment. m. Sold, at 38 per share, 2,600 shares of treasury common stock purchased in (g). n. Received a dividend of 0 .60 per share from the Solstice Corp. investment in (f). o. Sold 1,000 shares of Solstice Corp. at 45, including commission. p. Recorded the payment of semiannual interest on the bonds issue d in (c) and the amortization of the premium for six months. The amortization is determined using the straight-line method . q. Accrued interest for three months on the Dream Inc. bonds purchased in (I). r. Pinkberry Co. recorded total earnings of 240 ,000. Equinox Products recorded equity earnings for its share of Pinkberry Co. net income. s. The fair value for Solstice Corp. stock was 39. 02 per share on December 31, 2016. The investment is adjusted to fair value , using a valuation allowance account. Assume Valuation Allowance for Available-for-Sale Investments h ad a beginning balance of zero. Instructions 1. Journalize the selected transactions. 2. After all of the transaction s for the year ended December 31, 201 6, had been poste d [including the transactions recorded in part (1) and all adjusting entries), the data that follows were taken from the records of Equinox Products Inc. a. Prepare a multiple-step in come statement for the year ended December 31, 201 6, concluding with earnings per share . In computing earnings per share, assume that the average number of common shares outstanding was 100,000 and preferred dividends were 100,000. ( Round earnings per share to the nearest cent.) b. Prepare a retained earnings statement for the year ended December 31, 20 6. c. Prepare a balance sheet in report form as of December 31, 2016.arrow_forwardXYZ Company purchased 10,000 of its own shares at $14 per share. Journalize this transaction. DATE Debit Credit X/X XYZ Company sold 8,500 shares of treasury stock (from (c)) at $18 per share. Journalize this transaction. DATE Debit Credit X/X XYZ Company sold 1,500 shares of treasury stock (from (c)) at $13 per share. Journalize this transaction. DATE Debit Credit X/Xarrow_forwardInformation from the financial statements of Ames Fabricators, Incorporated included the following: Common shares Convertible preferred shares (convertible into 88,000 shares of common) 8% convertible bonds (convertible into 30,000 shares of common) Basic Diluted Numerator $ 632,000 + Ames's net income for the year ended December 31, 2024, is $860,000. The income tax rate is 25%. Ames paid dividends of $5 per share on its preferred stock during 2024. Denominator Required: Compute basic and diluted earnings per share for the year ended December 31, 2024. Note: Do not round intermediate calculations. Enter your answers in thousands (i.e., 10,000 should be entered as 10). 100,000 = $ December 31 Earnings per Share 2024 6.32 0 100,000 33,600 $ 1,000,000 2023 100,000 33,600 $ 1,000,000arrow_forward
- At December 31, year 1, Charter Holding Co. owned the following marketable securities in capital stock of publicly traded companies. Cost Current MarketValue L Brands, Inc. (5,000 shares: cost, $44 per share; market value, $52) $ 220,000 $ 260,000 The Gap, Inc. (4,000 shares: cost, $42 per share; market value, $39) 168,000 156,000 $ 388,000 $ 416,000 In year 2, Charter engaged in the following two transactions. Apr. 10 Sold 1,000 shares of its investment in L Brands, Inc., at a price of $58 per share, less a brokerage commission of $100. Aug. 7 Sold 2,000 shares of its investment in The Gap, Inc., at a price of $37 per share, less a brokerage commission of $150. At December 31, year 2, the market values of these stocks were: L Brands, Inc., $67 per share; and The Gap, Inc., $37 per share. Required: a-1. Calculate the amount of marketable securities reported in the asset section of Charter’s financial statements at December 31,…arrow_forwardDouglas Corporation issued at a premium of $10,000 a $200,000 bond issue convertible into 4,000 shares of common stock (par value $20). At the time of the conversion, the unamortized premium is $4,000, the market value of the bonds is $220,000, and the stock is quoted on the market at $60 per share. If the bonds are converted into common, what is the amount of paid-in capital in excess of par to be recorded on the conversion of the bonds?arrow_forwardPilsen Company issues 12% bonds with a face value of $10,000 and 600 shares of $10 par common stock in a combined sale, receiving total proceeds of $23,000 on December 31. Required: Record the transaction for each independent assumption shown: 1. The common stock has a current market value of $21 per share; the market value of the bonds is not known. 2. The common stock has a current market value of $24.50 per share; the bonds are selling at 98.arrow_forward
- Baur Company acquired 20,000 ordinary shares on October 1 for P1,344,000 to be held for trading. On November 30, the investee distributed a 12% ordinary share dividend when the market price of the share was P65. On December 31, the entity sold 5,000 shares for P350,000. What amount should be reported as gain on sale of trading securities in the current year? *arrow_forwardThe following information was taken from the books and records of Cullumber, Inc.: 1. Net Income $391,400 2. Capital structure: a. Convertible 6% bonds. Each of the 290, $1,000 bonds is convertible into 50 shares of common stock at the present date and for the next 10 years. 290,000 b. $10 par common stock, 190,000 shares issued and outstanding during the entire year. 1,900,000 c. Stock warrants outstanding to buy 15,040 shares of common stock at $20 per share. 3. Other information: a. Bonds converted during the year None b. Income tax rate 30% c. Convertible debt was outstanding the entire year d. Average market price per share of common stock during the year $32 e. Warrants were outstanding the entire year f. Warrants exercised during the year Compute diluted earnings per sharearrow_forwardSelected account balances of the Han Corporation as at December 31, 20x3 are as follows: Convertible bonds, 5% $31,045,617 Preferred Shares, Series A, $4, noncumulative, 60,000 shares issued and outstanding, each preferred share is convertible into 3 common 6,000,000 shares Preferred Shares, Series B, $5, cumulative, 35,000 shares issued and 3,500,000 outstanding Common shares, 3,000,000 shares issued and outstanding 42,000,000 Additional Information – The convertible bonds were issued on December 31, 20x0 and mature on December 31, 20x20, The face value of the bonds is $30,000,000. The bonds were issued to yield 4.7%. The bonds pay interest on June 30 and December 31 of each year. Each $1,000 bond is convertible into 20 common shares. In 20x3, Han purchased the shares of another company. As part of the agreement, Han agreed to issue an additional 80,000 shares on February 15, 20x4 if the net income of the other company for the year ended December 31, 20x3 was in excess of $1,000,000.…arrow_forward
- At December 31, year 1, Charter Holding Co. owned the following marketable securities in capital stock of publicly traded companies. Cost Current Market Value L Brands, Inc. (5,000 shares: cost, $44 per share; market value, $52) $ 220,000 $ 260,000 The Gap, Inc. (4,000 shares: cost, $42 per share; market value, $39) 168,000 156,000 $ 388,000 $ 416,000 In year 2, Charter engaged in the following two transactions. Apr. 10 Sold 1,000 shares of its investment in L Brands, Inc., at a price of $58 per share, less a brokerage commission of $100. Aug. 7 Sold 2,000 shares of its investment in The Gap, Inc., at a price of $37 per share, less a brokerage commission of $150. At December 31, year 2, the market values of these stocks were: L Brands, Inc., $67 per share; and The Gap, Inc., $37 per share. Required: e. Prepare the fair value adjusting entry required at December 31, year 2. f-1. Calculate the amount of marketable securities in the financial statements…arrow_forwardC. Utter Space Corp. had the following securities outstanding at the beginning of the current year: 10% convertible bonds payable, each P1,000 bond convertible into 10 ordinary shares or a total of P40,000 ordinary shares. Ordinary shares capital, P100 par, 250,000 shares Authorized, 100,000 shares issued 4,000,000 10,000,000 5,000,000 30% Net Income Income tax rate Required: Compute for Basic Earnings Per Share and Diluted Earnings Per Sharearrow_forwardKatrina Company reported the following information at the end of reporting period: 1,500,000 Bonds payable - 10% Preference share capital, 12% cumulative, P100 par, 30,000 shares Ordinary share capital, 100,000 shares, P50 par 3,000,000 5,000,000 The bonds are convertible into ordinary shares in the ratio of 20 ordinary shares for every P1,000 bond. The preference share is convertible into ordinary share in the ratio of two ordinary shares for one preference share. The net income for the year was P3,695,000 and the income tax rate is 30%. Required: 1. Basic earnings per share 2. Diluted earnings per sharearrow_forward
- Accounting (Text Only)AccountingISBN:9781285743615Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage Learning
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