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Stock option, convertible securities, diluted EPS

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ABE16-6

On January 1, 2012, Barwood Corporation granted 5,470 options to executives. Each option entitles the holder to purchase one share of Barwood's $5 par value common stock at $50 per share at any time during the next 5 years. The market price of the stock is $66 per share on the date of grant. The fair value of the options at the grant date is $164,800. The period of benefit is 2 years. Prepare Barwood's journal entries for January 1, 2012, and December 31, 2012 and 2013. (If no entry is required, enter No Entry as the description and 0 as the amount.)

Date Description/Account Debit Credit

1/1/12
12/31/12
12/31/13

ABE16-12

Rockland Corporation earned net income of $419,700 in 2012 and had 100,000 shares of common stock outstanding throughout the year. Also outstanding all year was $1,119,200 of 10% bonds, which are convertible into 22,384 shares of common. Rockland's tax rate is 40 percent. Compute Rockland's 2012 diluted earnings per share. (Round answer to 2 decimal places, e.g. 2.13.)

$______________________________

ABE16-13

DiCenta Corporation reported net income of $282,000 in 2012 and had 50,000 shares of common stock outstanding throughout the year. Also outstanding all year were 6,910 shares of cumulative preferred stock, each convertible into 2 shares of common. The preferred stock pays an annual dividend of $5 per share. DiCenta' tax rate is 40%. Compute DiCenta' 2012 diluted earnings per share. (Round answer to 2 decimal places, e.g. 5.23.)

$________________________________

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Solution Summary

Your tutorial gives instructional notes and the journal entries needed. Click in cells to see computations.

$2.19
See Also This Related BrainMass Solution

Myco basic diluted EPS convertible bonds preferred options

At January1,2013 Myco Corporation had outstanding the following securities:
$1,000,000, 5% cumulative convertible preferred shares,$50 par; each share is convertible into 2 shares of common stock.
7% convertible bonds, $2,000,000 face value issued at par ($1,000) per bond. Each bond is convertible into 30 shares of common stock
$6,000,000 common stock, $10 par value

Additional information:
a. On April 1, 2013, Myco purchased 100,000 shares of its common stock as treasury stock.
b. June 30, 2013, Myco issued a 4%stock dividend
c. On October 31, 2013, 50,000 shares of treasury stock were sold.
d. Common stock option outstanding as of 12/31/12 and exercisable in 2013 to purchase 40,000shares at an exercise price of $30
e. The market price of the stock peaked on October 31,2013 at $50 an on December 31, 2013 the market price of the stock closed at $30,; the average market price of stock during 2013 was $40
f. Net income for the year ended December 31, 2013 was $1,500,000
g. The income tax rate for 2013 was 40%
Required:
1.Compute Myco 's basic earnings per share for the year ended December 31, 2013.
2. Compute Myco's diluted earnings per share for the year ended December 31, 2013.

Show the calculation at how you arrived at your answer.

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