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P16-8 Barkley Company P23-6 MARCUS INC. Basic and Diluted

P16-8 (Computation of Basic and Diluted EPS) The information below pertains to Barkley Company for 2010.

Net income for the year $1,200,000
8% convertible bonds issued at par ($1,000 per bond). Each bond is convertible into 30 shares of common stock. 2,000,000

6% convertible, cumulative preferred stock, $100 par value. Each share is convertible into 3 shares of common stock. 4,000,000

Common stock, $10 par value 6,000,000
Tax rate for 2010 40%
Average market price of common stock $25 per share

There were no changes during 2010 in the number of common shares, preferred shares, or convertible bonds outstanding. There is no treasury stock. The company also has common stock options (granted in a prior year) to purchase 75,000 shares of common stock at $20 per share.

Instructions
(a) Compute basic earnings per share for 2010.
(b) Compute diluted earnings per share for 2010.

P23-6 (SCF?Indirect Method, and Net Cash Flow from Operating Activities, Direct Method)

Comparative balance sheet accounts of Marcus Inc. are presented below.
MARCUS INC.
COMPARATIVE BALANCE SHEET ACCOUNTS
AS OF DECEMBER 31, 2010 AND 2009

December 31
Debit Accounts 2010 2009

Cash $ 42,000 $ 33,750
Accounts Receivable 70,500 60,000
Merchandise Inventory 30,000 24,000
Investments (available-for-sale) 22,250 38,500
Machinery 30,000 18,750
Buildings 67,500 56,250
Land 7,500 7,500
$269,750 $238,750
Credit Accounts
Allowance for Doubtful Accounts $ 2,250 $ 1,500
Accumulated Depreciation?Machinery 5,625 2,250
Accumulated Depreciation?Buildings 13,500 9,000
Accounts Payable 35,000 24,750
Accrued Payables 3,375 2,625
Long-Term Note Payable 21,000 31,000
Common Stock, no par 150,000 125,000
Retained Earnings 39,000 42,625
$269,750 $238,750

Additional data (ignoring taxes):
1. Net income for the year was $42,500.
2. Cash dividends declared and paid during the year were $21,125.
3. A 20% stock dividend was declared during the year. $25,000 of retained earnings was capitalized.
4. Investments that cost $25,000 were sold during the year for $28,750.
5. Machinery that cost $3,750, on which $750 of depreciation had accumulated, was sold for $2,200.

Marcus's 2010 income statement follows (ignoring taxes).

Sales $540,000
Less: Cost of goods sold 380,000

Gross margin 160,000
Less: Operating expenses (includes $8,625 depreciation and $5,400
bad debts) 120,450
Income from operations 39,550
Other: Gain on sale of investments $3,750
Loss on sale of machinery (800) 2,950
Net income $ 42,500

Instructions
(a) Compute net cash flow from operating activities using the direct method.
(b) Prepare a statement of cash flows using the indirect method.

Attachments

Solution Summary

Your tutorial is in Excel, attached. Each problem is on a separate tab. I created some account analysis so you could see how I found the amounts for write offs, purchases of investments, purchases for building and purchases for machinery.

$2.19