Financial Accounting
14th Edition
ISBN: 9781305088436
Author: Carl Warren, Jim Reeve, Jonathan Duchac
Publisher: Cengage Learning
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Chapter 14, Problem 1PA
1.
To determine
Calculate earnings per share of common stock for each plan, if income before bond interest and income tax is $2,100,000.
2.
To determine
Calculate earnings per share of common stock for each plan, if income before bond interest and income tax is $1,050,000.
3.
To determine
Describe the advantages and disadvantages of each plan.
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Please see the attachment for details:
Instructions1. Determine the earnings per share of common stock for each plan, assuming that the income before bond interest and income tax is $2,100,000.2. Determine the earnings per share of common stock for each plan, assuming that the income before bond interest and income tax is $1,050,000.3. Discuss the advantages and disadvantages of each plan.
Three different plans for financing an $2,100,000 corporation are under consideration by its organizers. Under each of the following plans, the securities will be issued at their par or face amount, and the income tax rate is estimated at 40% of income:
Plan 1
Plan 2
Plan 3
10% Bonds
_
_
$1,050,000
Preferred 5% stock, $80 par
_
$1,050,000
525,000
Common stock, $2.1 par
$2,100,000
1,050,000
525,000
Total
$ 2,100,000
$ 2,100,000
$ 2,100,000
Required:
1. Determine the earnings per share of common stock for each plan, assuming that the income before bond interest and income tax is $4,200,000. Enter answers in dollars and cents, rounding to two decimal places.
Earnings Per Share on Common Stock
Plan 1
$fill in the blank 1
Plan 2
fill in the blank 2
Plan 3
fill in the blank 3
2. Determine the earnings per share of common stock for each plan, assuming that the income before bond interest and income tax is $1,995,000. Enter answers in…
Chapter 14 Solutions
Financial Accounting
Ch. 14 - Describe the two distinct obligations incurred by...Ch. 14 - Explain the meaning of each of the following terms...Ch. 14 - If you asked your broker to buy you a 12% bond...Ch. 14 - A corporation issues 26,000,000 of 9% bonds to...Ch. 14 - If bonds issued by a corporation are sold at a...Ch. 14 - Prob. 6DQCh. 14 - Bonds Payable has a balance of 5,000,000, and...Ch. 14 - What is a mortgage note?Ch. 14 - Fleeson Company needs additional funds to purchase...Ch. 14 - In what section of the balance sheet would a bond...
Ch. 14 - Prob. 1PEACh. 14 - Brower Co. is considering the following...Ch. 14 - On January 1, the first day of the fiscal year, a...Ch. 14 - On January 1, the first day of the fiscal year, a...Ch. 14 - On the first day of the fiscal year, a company...Ch. 14 - On the first day of the fiscal year, a company...Ch. 14 - Prob. 4PEACh. 14 - Prob. 4PEBCh. 14 - On the first day of the fiscal year, a company...Ch. 14 - On the first day of the fiscal year, a company...Ch. 14 - Prob. 6PEACh. 14 - Prob. 6PEBCh. 14 - A 1,500,000 bond issue on which there is an...Ch. 14 - A 500,000 bond issue on which there is an...Ch. 14 - On the first day of the fiscal year, a company...Ch. 14 - On the first day of the fiscal year, a company...Ch. 14 - Prob. 9PEACh. 14 - Prob. 9PEBCh. 14 - Prob. 1ECh. 14 - Prob. 2ECh. 14 - Prob. 3ECh. 14 - Prob. 4ECh. 14 - Prob. 5ECh. 14 - On the first day of its fiscal year, Pretender...Ch. 14 - Lerner Corporation wholesales repair products to...Ch. 14 - Prob. 8ECh. 14 - Emil Corp. produces and sells wind-energy-driven...Ch. 14 - On the first day of the fiscal year, Shiller...Ch. 14 - Prob. 11ECh. 14 - On January 1, 2016, Bryson Company obtained a...Ch. 14 - Prob. 13ECh. 14 - Prob. 14ECh. 14 - Prob. 15ECh. 14 - Prob. 16ECh. 14 - Tommy John is going to receive 1,000,000 in three...Ch. 14 - Prob. 18ECh. 14 - On January 1, 2016, you win 50,000,000 in the...Ch. 14 - Prob. 20ECh. 14 - Prob. 21ECh. 14 - Prob. 22ECh. 14 - Prob. 23ECh. 14 - Prob. 24ECh. 14 - Prob. 25ECh. 14 - Boyd Co. produces and sells aviation equipment. On...Ch. 14 - Prob. 1PACh. 14 - Prob. 2PACh. 14 - Saverin Inc. produces and sells outdoor equipment....Ch. 14 - The following transactions were completed by...Ch. 14 - Prob. 5PACh. 14 - Saverin, Inc. produces and sells outdoor...Ch. 14 - Prob. 1PBCh. 14 - Prob. 2PBCh. 14 - Prob. 3PBCh. 14 - The following transactions were completed by...Ch. 14 - Prob. 5PBCh. 14 - Prob. 6PBCh. 14 - General Electric Capital, a division of General...Ch. 14 - Solar Industries develops and produces...Ch. 14 - Prob. 3CPCh. 14 - Xentec Inc. has decided to expand its operations...Ch. 14 - Prob. 5CPCh. 14 - The following financial data (in thousands) were...
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