Computing EPS: Convertible DebtShaffer Corporation issued 100, $1,000, 10% convertible bonds in 2019 at face value. Each bond is convertible into 100 shares of common stock. Shaffer's net income for2020 is $1,824,000 ($2,432,000 before tax). Considering all factors except convertible bonds, average common shares outstanding for 2020 were 1,010,000.• Note: In the following calculations, enter the earnings per share amounts in dollars and cents, rounded to the nearest penny.a. Compute basic EPS.b. Compute diluted EPS.Net Income Available to Weighted Avg. CommonCommon StockholdersShares OutstandingPerShare1.8 *Basic EPS $1,822,125 *1,012,500 $1,020,000 $Diluted EPS $1,827,750 *1.8c. How do the answers to parts a and b change if the bonds were issued on July 1, 2020?PerShareNet Income Available to Weighted Avg. CommonCommon Stockholders Shares Outstanding$0 x0 xBasic EPS0 x0 x $0 x $Diluted EPS $0 xd. Ignoring part c, how do the answers to parts a and b changeone-half of the bonds were converted on July 1, 2020?Hint: For this exercise, assume that the net income given needs to be adjusted to reflect six months of interest expense instead of one year of interest expense.Net Income Available to Weighted Avg. CommonPerCommon StockholdersShareShares Outstanding1,012,500Basic EPS $1,822,125 *Diluted EPS $1,827,750 *1,020,0001.81.8→→

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Shaffer Corporation issued 100, $1,000, 10% convertible bonds in 2019 at face value. Each bond is convertible into 100 shares of common stock. Shaffer's net income for 2020 is $1,824,000 ($2,432,000 before tax). Considering all factors except convertible bonds, average common shares outstanding for 2020 were 1,010,000. • Note: In the following calculations, enter the earnings per share amounts in dollars and cents, rounded to the nearest penny. a. Compute basic EPS. b. Compute diluted EPS. Net Income Available to Common Stockholders 1,822,125 x Weighted Avg. Common Shares Outstanding Per Share Basic EPS 1,012,500 x $ 1,020,000 $ 1.8 x 1.8 ✔ Diluted EPS $ 1,827,750 x c. How do the answers to parts a and b change if the bonds were issued on July 1, 2020? Net Income Available to Weighted Avg. Common Common Stockholders Shares Outstanding Per Share Basic EPS $ 0x 0x 0 x $ 0 x $ 0x 0 x Diluted EPS $ d Ignoring part c how do the answers to parts and behange if one half of the honde converted on July 1 20202

Shaffer Corporation issued 100, $1,000, 10% convertible bonds in 2019 at face value. Each bond is convertible into 100 shares of common stock. Shaffer's net income for 2020 is $1,824,000 ($2,432,000 before tax). Considering all factors except convertible bonds, average common shares outstanding for 2020 were 1,010,000. • Note: In the following calculations, enter the earnings per share amounts in dollars and cents, rounded to the nearest penny. a. Compute basic EPS. b. Compute diluted EPS. Net Income Available to Common Stockholders 1,822,125 x Weighted Avg. Common Shares Outstanding Per Share Basic EPS 1,012,500 x $ 1,020,000 $ 1.8 x 1.8 ✔ Diluted EPS $ 1,827,750 x c. How do the answers to parts a and b change if the bonds were issued on July 1, 2020? Net Income Available to Weighted Avg. Common Common Stockholders Shares Outstanding Per Share Basic EPS $ 0x 0x 0 x $ 0 x $ 0x 0 x Diluted EPS $ d Ignoring part c how do the answers to parts and behange if one half of the honde converted on July 1 20202

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter16: Retained Earnings And Earnings Per Share

Section: Chapter Questions

Problem 10MC

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Waseca Company had 5 convertible securities outstanding during all of 2019. It paid the appropriate interest (and amortized any related premium or discount using the straight line method) and dividends on each security during 2019. Each of the convertible securities is described in the following table: Additional data: Net income for 2019 totaled 119,460. The weighted average number of common shares outstanding during 2019 was 40,000 shares. No share options or warrants arc outstanding. The effective corporate income tax rate is 30%. Required: 1. Prepare a schedule that lists the impact of the assumed conversion of each convertible security on diluted earnings per share. 2. Prepare a ranking of the order in which each of the convertible securities should be included in diluted earnings per share. 3. Compute basic earnings per share. 4. Compute diluted earnings per share. 5. Indicate the amount(s) of the earnings per share that Waseca would report on its 2019 income statement.
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.
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.
Chung Inc. issued $50,000 of 3-year bonds on January 1, 2018, with a stated rate of 4% and a market rate of 4%. The bonds paid interest semi-annually on June 30 and Dec. 31. How much money did the company receive when the bonds were issued? The bonds would be quoted at what rate?
For each of the unrelated transactions described below, present the entries required to record each transaction. 2. Blossom Company issued $19,300,000 par value 10% bonds at 98. One detachable stock purchase warrant was issued with each $100 par value bond. At the time of issuance, the warrants were selling for $4. 3. Suppose Sepracor, Inc. called its convertible debt in 2020. Assume the following related to the transaction. The 11%, $9,700,000 par value bonds were converted into 970,000 shares of $1 par value common stock on July 1, 2020. On July 1, there was $56,000 of unamortized discount applicable to the bonds, and the company paid an additional $79,000 to the bondholders to induce conversion of all the bonds. The company records the conversion using the book value method. No. Account Titles and Explanation Debit Credit 2. enter an account title for the second transaction enter a debit amount enter a credit amount enter an account…
Computing EPS: Convertible Debt Shaffer Corporation issued 100, $1,000, 10% convertible bonds in 2019 at face value. Each bond is convertible into 100 shares of common stock. Shaffer's net income for 2020 is $1,824,000 ($2,432,000 before tax). Considering all factors except convertible bonds, average common shares outstanding for 2020 were 1,010,000. Note: In the following calculations, round earnings per share amounts to two decimal places. a. Compute basic EPS. b. Compute diluted EPS. Net Income Available toCommon Stockholders Weighted Avg. CommonShares Outstanding PerShare Basic EPS Diluted EPS c. How do the answers to parts a and b change if the bonds were issued on July 1, 2020? Net Income Available toCommon Stockholders Weighted Avg. CommonShares Outstanding PerShare Basic EPS Diluted EPS d. Ignoring part c, how do the answers to parts a and b change if one-half of the bonds were converted on…
Computing EPS: Convertible Debt Shaffer Corporation issued 100, $1,000, 10% convertible bonds in 2019 at face value. Each bond is convertible into 100 shares of common stock. Shaffer's net income for 2020 is $1,824,000 ($2,432,000 before tax). Considering all factors except convertible bonds, average common shares outstanding for 2020 were 1,010,000. Note: In the following calculations, round earnings per share amounts to two decimal places. d. Ignoring part c, how do the answers to parts a and b change if one-half of the bonds were converted on July 1, 2020?Hint: For this exercise, assume that the net income given needs to be adjusted to reflect six months of interest expense instead of one year of interest expense. Net Income Available toCommon Stockholders Weighted Avg. CommonShares Outstanding PerShare Basic EPS Diluted EPS
In the statement of financial position of Leblanc Company as of December 31, 2020, the following accounts appear. Bonds Payable, 18%, due January 1, 2023 P1,000,000 Premium on Bonds Payable 70,000 Accrued interest on Bonds Payable 90,000 Interest is payable semi-annually on January 1 and July 1. On January 1, 2021, Leblanc redeemed the bonds at 98 plus accrued interest. How much is the gain (loss) on the redemption of the bonds? Enclosed in parenthesis in case of loss.
Crane Company issued $740,000, 10-year, 5% bonds at 103. Suppose the remaining Premium on Bonds Payable was $13,320 on December 31, 2025. Show the balance sheet presentation on this date. CRANE COMPANYBalance Sheet (Partial)choose the accounting periodchoose the accounting period select an opening subsection nameselect an opening subsection name enter a balance sheet itementer a balance sheet item $enter a dollar amount enter a dollar amount select between addition and deductionselect between addition and deduction : enter a balance sheet itementer a balance sheet item enter a dollar amountenter a dollar amount $enter a total of the two previous amounts enter a total of the two previous amounts
Presented below are selected transactions on the books of Swifty Corporation. June 1, 2020 Dec 31 Jan. 1, 2021 August 1 Dec. 31 Bonds payable with a par value of $708,000, which are dated January 1, 2017, are sold at 98 plus accrued interest. They are coupon bonds, bear interest at 8% (payable annually at January 1), and mature January 1, 2030. (Use interest expense account for accrued interest.) Adjusting entries are made to record the accrued interest on the bonds, and the amortization of the proper amount of discount. (Use straight-line amortization) interest on the bonds is paid. Bonds with par value of $283,200 are called at 102 plus accrued interest, and retired. (Bond discount is to be amortized only at the end of each year) Adjusting entries are made to record the accrued interest on the bonds, and the proper amount of discount amortized. Prepare journal entries for the transactions above. (Round intermediate calculations to 6 decimal places, eg. 1.251247 and final answers to O…
Bradley-Link’s December 31, 2021, balance sheet included the following items: Long-Term Liabilities ($ in millions) 11.0% convertible bonds, callable at 102 beginning in 2022,due 2025 (net of unamortized discount of $5) [note 8] $245 11.8% registered bonds callable at 105 beginning in 2031,due 2035 (net of unamortized discount of $1) [note 8] 68 Shareholders’ Equity 6 Equity—stock warrants Note 8: Bonds (in part)The 11.0% bonds were issued in 2008 at 96.0 to yield 10%. Interest is paid semiannually on June 30 and December 31. Each $1,000 bond is convertible into 50 shares of the Company’s no par common stock. The 11.8% bonds were issued in 2012 at 103 to yield 10%. Interest is paid semiannually on June 30 and December 31. Each $1,000 bond was issued with 50 detachable stock warrants, each of which entitles the holder to purchase one share of the Company’s no par common stock for $30, beginning 2022. On January 3, 2022, when Bradley-Link’s common stock had a market…
Presented below are selected transactions on the books of Simonson Corporation. May 1, 2020 000 Bonds payable with a par value of $900,000, which are dated January 1, 2020, are sold at 106 plus accrued interest. They are coupon bonds, bear interest at 12% (payable annually at January 1), and mature January 1, 2030. (Use interest expense account for accrued interest.) Dec. 31 Adjusting entries are made to record the accrued interest on the bonds, and the amortization of the proper amount of premium. (Use straight-line amortization.) Jan. 1, 2021 Interest on the bonds is paid. April 1 Bonds with par value of $360,000 are called at 102 plus accrued interest, and redeemed. (Bond premium is to be amortized only at the end of each year.) Dec. 31 Adjusting entries are made to record the accrued interest on the bonds, and the proper amount of premium amortized. Instructions (Round to two decimal places.) Prepare journal entries for the transactions above.