Intermediate Accounting Final

Presented below is the stockholders' equity section of Oaks Corporation at December 31, 2014: Common stock, par value $20; authorized 75,000 shares; issued and outstanding 45,000 shares $ 900,000 Paid-in capital in excess of par value 350,000 Retained earnings 300,000 $1,550,000 During 2015, the following transactions occurred relating to stockholders' equity: 3,000 shares were reacquired at $28 per share. 3,000 shares were reacquired at $35 per share. 1,800 shares of treasury stock were sold at $30 per share. For the year ended December 31, 2015, Oaks reported net income of $450,000. Assuming Oaks accounts for treasury stock under the cost method, what should it report as total stockholders' equity on its December 31, 2015, balance sheet?

$1,550,000 - (3,000 * $28) - (3,000 * $35) + (1,800 * $30) + $450,000 = $1,865,000

Presented below is information related to Hale Corporation: Common Stock, $1 par $4,500,000 Paid-in Capital in Excess of Par—Common Stock 550,000 Preferred 8 1/2% Stock, $50 par 2,000,000 Paid-in Capital in Excess of Par—Preferred Stock 400,000 Retained Earnings 1,500,000 Treasury Common Stock (at cost) 150,000 71. The total stockholders' equity of Hale Corporation is

$4,500,000 + $400,000 + $550,000 + $2,000,000 + $1,500,000 - $150,000 = $8,800,000.

On January 2, 2014, Perez Co. issued at par $10,000 of 8% bonds convertible in total into 1,000 shares of Perez's common stock. No bonds were converted during 2014. Throughout 2014, Perez had 1,000 shares of common stock outstanding. Perez's 2014 net income was $6,000, and its income tax rate is 30%. No potentially dilutive securities other than the convertible bonds were outstanding during 2014. Perez's diluted earnings per share for 2014 would be (rounded to the nearest penny)

$6,000 + ($10,000 × .08 × .70) / 1000 + 1000 = 3.28

On July 1, 2014, an interest payment date, $90,000 of Parks Co. bonds were converted into 1,800 shares of Parks Co. common stock each having a par value of $45 and a market value of $54. There is $3,600 unamortized discount on the bonds. Using the book value method, Parks would record

$90,000 - (1,600 × $45) - $3,600 = $5,400.

Colson Inc. declared a $320,000 cash dividend. It currently has 12,000 shares of 7%, $100 par value cumulative preferred stock outstanding. It is one year in arrears on its preferred stock. How much cash will Colson distribute to the common stockholders?

12,000 * $100 * .07 = $84,000 $320,000 - ($84,000 * 2) = $152,000.

Anders, Inc., has 15,000 shares of 5%, $100 par value, cumulative preferred stock and 60,000 shares of $1 par value common stock outstanding at December 31, 2015. There were no dividends declared in 2013. The board of directors declares and pays a $135,000 dividend in 2014 and in 2015. What is the amount of dividends received by the common stockholders in 2015?

15,000 * $100 * .05 = $75,000 ($135,000 * 2) - ($75,000 * 3) = $45,000

On September 1, 2014, Valdez Company reacquired 20,000 shares of its $10 par value common stock for $15 per share. Valdez uses the cost method to account for treasury stock. The journal entry to record the reacquisition of the stock should debit a. Treasury Stock for $200,000. b. Common Stock for $200,000. c. Common Stock for $200,000 and Paid-in Capital in Excess of Par for $75,000. d. Treasury Stock for $300,000

20,000 * $15 = $300,000

On December 31, 2014, Gonzalez Company granted some of its executives options to purchase 150,000 shares of the company's $10 par common stock at an option price of $50 per share. The Black-Scholes option pricing model determines total compensation expense to be $1,125,000. The options become exercisable on January 1, 2015, and represent compensation for executives' services over a three-year period beginning January 1, 2015. At December 31, 2015 none of the executives had exercised their options. What is the impact on Gonzalez's net income for the year ended December 31, 2015 as a result of this transaction under the fair value method?

$1,125,000 / 3 = $375,000 decrease

In order to retain certain key executives, Smiley Corporation granted them incentive stock options on December 31, 2013. 120,000 options were granted at an option price of $35 per share. Market prices of the stock were as follows: December 31, 2014 $46 per share December 31, 2015 51 per share The options were granted as compensation for executives' services to be rendered over a two-year period beginning January 1, 2014. The Black-Scholes option pricing model determines total compensation expense to be $1,200,000. What amount of compensation expense should Smiley recognize as a result of this plan for the year ended December 31, 2014 under the fair value method?

$1,200,000 / 2 = $600,000.

Layne Corporation had the following information in its financial statements for the years ended 2014 and 2015: Cash dividends for the year 2015 $ 10,000 Net income for the year ended 2015 83,000 Market price of stock, 12/31/14 10 Market price of stock, 12/31/15 12 Common stockholders' equity, 12/31/14 1,600,000 Common stockholders' equity, 12/31/15 1,980,000 Outstanding shares, 12/31/15 180,000 Preferred dividends for the year ended 2015 15,000 What is the book value per share for Layne Corporation for the year ended 2015?

$1,980,000 ÷ 180,000 = $11.00

Layne Corporation had the following information in its financial statements for the years ended 2014 and 2015: Cash dividends for the year 2015 $ 10,000 Net income for the year ended 2015 83,000 Market price of stock, 12/31/14 10 Market price of stock, 12/31/15 12 Common stockholders' equity, 12/31/14 1,600,000 Common stockholders' equity, 12/31/15 1,980,000 Outstanding shares, 12/31/15 180,000 Preferred dividends for the year ended 2015 15,000 What is the payout ratio for Layne Corporation for the year ended 2015?

$10,000 ÷ ($83,000 - $15,000) = 14.7%

Litke Corporation issued at a premium of $5,000 a $100,000 bond issue convertible into 2,000 shares of common stock (par value $20). At the time of the conversion, the unamortized premium is $2,000, the market value of the bonds is $110,000, 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?

$100,000 + $2,000 - (2,000 × $20) = $62,000

On January 1, 2015, Ritter Company granted stock options to officers and key employees for the purchase of 15,000 shares of the company's $1 par common stock at $20 per share as additional compensation for services to be rendered over the next three years. The options are exercisable during a five-year period beginning January 1, 2018 by grantees still employed by Ritter. The Black-Scholes option pricing model determines total compensation expense to be $135,000. The market price of common stock was $26 per share at the date of grant. The journal entry to record the compensation expense related to these options for 2015 would include a credit to the Paid-in Capital—Stock Options account for

$135,000 ÷ 3 = $45,000.

Turner Corporation had the following information in its financial statements for the year ended 2014 and 2015: Cash dividends for the year 2015 $ 15,000 Net income for the year ended 2015 130,000 Market price of stock, 12/31/15 24 Common stockholders' equity, 12/31/14 2,200,000 Common stockholders' equity, 12/31/15 2,400,000 Outstanding shares, 12/31/15 150,000 Preferred dividends for the year ended 2015 30,000 What is the payout ratio for Turner Corporation for the year ended 2015?

$15,000 ÷ ($130,000 - $30,000) = 15.0%

Chang Corporation issued $4,000,000 of 9%, ten-year convertible bonds on July 1, 2014 at 96.1 plus accrued interest. The bonds were dated April 1, 2014 with interest payable April 1 and October 1. Bond discount is amortized semiannually on a straight-line basis. On April 1, 2015, $800,000 of these bonds were converted into 500 shares of $20 par value common stock. Accrued interest was paid in cash at the time of conversion What should be the amount of the unamortized bond discount on April 1, 2015 relating to the bonds converted?

$156,000 ÷ 117 = $1,333.33/month $156,000 - [($1,333.33 × 3) + ($1,333.33 × 6] × 800000/4000000 = 28800

Turner Corporation had the following information in its financial statements for the year ended 2014 and 2015: Cash dividends for the year 2015 $ 15,000 Net income for the year ended 2015 130,000 Market price of stock, 12/31/15 24 Common stockholders' equity, 12/31/14 2,200,000 Common stockholders' equity, 12/31/15 2,400,000 Outstanding shares, 12/31/15 150,000 Preferred dividends for the year ended 2015 30,000 What is the book value per share for Turner Corporation for the year ended 2015?

$2,400,000 ÷ 150,000 = $16.00

On January 1, 2015, Evans Company granted Tim Telfer, an employee, an option to buy 3,000 shares of Evans Co. stock for $25 per share, the option exercisable for 5 years from date of grant. Using a fair value option pricing model, total compensation expense is determined to be $22,500. Telfer exercised his option on September 1, 2015, and sold his 1,000 shares on December 1, 2015. Quoted market prices of Evans Co. stock during 2015 were January 1 $25 per share September 1 $30 per share December 1 $34 per share The service period is for three years beginning January 1, 2015. As a result of the option granted to Telfer, using the fair value method, Evans should recognize compensation expense for 2015 on its books in the amount of

$22,500 ÷ 3 = $7,500

On January 2, 2015, Mize Co. issued at par $300,000 of 9% convertible bonds. Each $1,000 bond is convertible into 60 shares. No bonds were converted during 2015. Mize had 100,000 shares of common stock outstanding during 2015. Mize 's 2015 net income was $240,000 and the income tax rate was 30%. Mize's diluted earnings per share for 2015 would be (rounded to the nearest penny)

$240,000 + ($300,000 × .09 × .7) / 100,000 + [($300,000 ÷ $1,000) × 60)] = 2.19

At the beginning of 2015, Hamilton Company had retained earnings of $250,000. During the year Hamilton reported net income of $75,000, sold treasury stock at a "gain" of $27,000, declared a cash dividend of $45,000, and declared and issued a small stock dividend of 1,500 shares ($10 par value) when the fair value of the stock was $30 per share. The amount of retained earnings available for dividends at the end of 2015 was:

$250,000 + $75,000 - $45,000 - (1,500 * $30) = $235,000.

On December 31, 2014, Kessler Company granted some of its executives options to purchase 45,000 shares of the company's $10 par common stock at an option price of $50 per share. The options become exercisable on January 1, 2015, and represent compensation for executives' services over a three-year period beginning January 1, 2015. The Black-Scholes option pricing model determines total compensation expense to be $270,000. At December 31, 2015, none of the executives had exercised their options. What is the impact on Kessler's net income for the year ended December 31, 2015 as a result of this transaction under the fair value method?

$270,000 ÷ 3 = $90,000.

At December 31, 2014, Kifer Company had 800,000 shares of common stock outstanding. On October 1, 2015, an additional 160,000 shares of common stock were issued. In addition, Kifer had $10,000,000 of 6% convertible bonds outstanding at December 31, 2014, which are convertible into 360,000 shares of common stock. No bonds were converted into common stock in 2015. The net income for the year ended December 31, 2015, was $3,000,000. Assuming the income tax rate was 30%, the diluted earnings per share for the year ended December 31, 2015, should be (rounded to the nearest penny)

$3,000,000 + ($10,000,000 × .06 × .7) / 800,000 + (160,000 × 3/12 ) + 360,000 = 2.85

On January 1, 2015 Reese Company granted Jack Buchanan, an employee, an option to buy 300 shares of Reese Co. stock for $40 per share, the option exercisable for 5 years from date of grant. Using a fair value option pricing model, total compensation expense is determined to be $3,600. Buchanan exercised his option on September 1, 2015, and sold his 100 shares on December 1, 2015. Quoted market prices of Reese Co. stock during 2015 were: January 1 $40 per share September 1 $48 per share December 1 $54 per share The service period is for two years beginning January 1, 2015. As a result of the option granted to Buchanan, using the fair value method, Reese should recognize compensation expense for 2015 on its books in the amount of

$3,600 / 2 = $1,800.

On January 1, 2014, Trent Company granted Dick Williams, an employee, an option to buy 400 shares of Trent Co. stock for $30 per share, the option exercisable for 5 years from date of grant. Using a fair value option pricing model, total compensation expense is determined to be $3,600. Williams exercised his option on September 1, 2014, and sold his 400 shares on December 1, 2014. Quoted market prices of Trent Co. stock during 2014 were: January 1 $30 per share September 1 $36 per share December 1 $40 per share The service period is for two years beginning January 1, 2014. As a result of the option granted to Williams, using the fair value method, Trent should recognize compensation expense for 2014 on its books in the amount of

$3,600 / 2 = 1,800

At December 31, 2014, Emley Company had 1,200,000 shares of common stock outstanding. On October 1, 2015, an additional 400,000 shares of common stock were issued. In addition, Emley had $10,000,000 of 6% convertible bonds outstanding at December 31, 2014, which are convertible into 800,000 shares of common stock. No bonds were converted into common stock in 2015. The net income for the year ended December 31, 2015, was $3,750,000. Assuming the income tax rate was 30%, what should be the diluted earnings per share for the year ended December 31, 2015, rounded to the nearest penny?

$3,750,000 + ($10,000,000 × .06 × .7) / 1,200,000 + (400,000 3/12) + 800,000 = 1.99

At the beginning of 2015, Flaherty Company had retained earnings of $350,000. During the year Flaherty reported net income of $100,000, sold treasury stock at a "gain" of $36,000, declared a cash dividend of $60,000, and declared and issued a small stock dividend of 3,000 shares ($10 par value) when the fair value of the stock was $20 per share. The amount of retained earnings available for dividends at the end of 2015 was

$350,000 + $100,000 - $60,000 - (3,000 * $20) = $330,000.

Chang Corporation issued $4,000,000 of 9%, ten-year convertible bonds on July 1, 2014 at 96.1 plus accrued interest. The bonds were dated April 1, 2014 with interest payable April 1 and October 1. Bond discount is amortized semiannually on a straight-line basis. On April 1, 2015, $800,000 of these bonds were converted into 500 shares of $20 par value common stock. Accrued interest was paid in cash at the time of conversion If "interest payable" were credited when the bonds were issued, what should be the amount of the debit to "interest expense" on October 1, 2014?

$4,000,000 - $3,844,000) ÷ 117 = $1,333.33/month ($4,000,000 × .09 × 3/12) + ($1,333.33 × 3) = $94,000

At December 31, 2014, Tatum Company had 2,000,000 shares of common stock outstanding. On January 1, 2015, Tatum issued 500,000 shares of preferred stock which were convertible into 1,000,000 shares of common stock. During 2015, Tatum declared and paid $1,200,000 cash dividends on the common stock and $400,000 cash dividends on the preferred stock. Net income for the year ended December 31, 2015, was $4,000,000. Assuming an income tax rate of 30%, what should be diluted earnings per share for the year ended December 31, 2015? (Round to the nearest penny.)

$4,000,000 / 2,000,000 + 1,000,000 = 1.33

On July 1, 2014, Ellison Company granted Sam Wine, an employee, an option to buy 1,000 shares of Ellison Co. stock for $30 per share, the option exercisable for 5 years from date of grant. Using a fair value option pricing model, total compensation expense is determined to be $4,500. Wine exercised his option on October 1, 2014 and sold his 1,000 shares on December 1, 2014. Quoted market prices of Ellison Co. stock in 2014 were: July 1 $30 per share October 1 $36 per share December 1 $40 per share The service period is for three years beginning January 1, 2014. As a result of the option granted to Wine, using the fair value method, Ellison should recognize compensation expense on its books in the amount of

$4,500 / 3 = $1,500

Presented below is information related to Hale Corporation: Common Stock, $1 par $4,500,000 Paid-in Capital in Excess of Par—Common Stock 550,000 Preferred 8 1/2% Stock, $50 par 2,000,000 Paid-in Capital in Excess of Par—Preferred Stock 400,000 Retained Earnings 1,500,000 Treasury Common Stock (at cost) 150,000 The total paid-in capital (cash collected) related to the common stock is

$4,500,000 + $550,000 = $5,050,000

During 2014, Gordon Company issued at 104 four hundred, $1,000 bonds due in ten years. One detachable stock warrant entitling the holder to purchase 15 shares of Gordon's common stock was attached to each bond. At the date of issuance, the market value of the bonds, without the stock warrants, was quoted at 96. The market value of each detachable warrant was quoted at $40. What amount, if any, of the proceeds from the issuance should be accounted for as part of Gordon's stockholders' equity?

$400,000 × .96) + (400 × $40) = $400,000; $400,000 × 1.04 = $416,000 16000/400000 * 416000 = 16,640

Weiser Corp. on January 1, 2012, granted stock options for 40,000 shares of its $10 par value common stock to its key employees. The market price of the common stock on that date was $23 per share and the option price was $20. The Black-Scholes option pricing model determines total compensation expense to be $420,000. The options are exercisable beginning January 1, 2015, provided those key employees are still in Weiser's employ at the time the options are exercised. The options expire on January 1, 2016. On January 1, 2015, when the market price of the stock was $29 per share, all 40,000 options were exercised. The amount of compensation expense Weiser should record for 2015 under the fair value method is

$420,000 ÷ 3 = $140,000/year.

At December 31, 2014, Sager Co. had 1,200,000 shares of common stock outstanding. In addition, Sager had 450,000 shares of preferred stock which were convertible into 750,000 shares of common stock. During 2015, Sager paid $900,000 cash dividends on the common stock and $600,000 cash dividends on the preferred stock. Net income for 2015 was $5,100,000 and the income tax rate was 40%. The diluted earnings per share for 2015 is (rounded to the nearest penny)

$5,100,000 / 1,200,000 + 750,000 = 2.62

On December 1, 2014, Lester Company issued at 103, five hundred of its 9%, $1,000 bonds. Attached to each bond was one detachable stock warrant entitling the holder to purchase 10 shares of Lester's common stock. On December 1, 2014, the market value of the bonds, without the stock warrants, was 95, and the market value of each stock purchase warrant was $50. The amount of the proceeds from the issuance that should be accounted for as the initial carrying value of the bonds payable would be

$500,000 × .95) + (500 × $50) = $500,000; $500,000 × 1.03 = $515,000 475000/500000 * 515000 = 489250

Sosa Co.'s stockholders' equity at January 1, 2014 is as follows: Common stock, $10 par value; authorized 300,000 shares; Outstanding 225,000 shares $2,250,000 Paid-in capital in excess of par 600,000 Retained earnings 2,190,000 Total $5,040,000 During 2014, Sosa had the following stock transactions: Acquired 6,000 shares of its stock for $270,000. Sold 3,600 treasury shares at $50 a share. Sold the remaining treasury shares at $41 per share. No other stock transactions occurred during 2014. Assuming Sosa uses the cost method to record treasury stock transactions, the total amount of all additional paid-in capital accounts at December 31, 2014 is

$600,000 + (3,600 * $5) - (2,400 * $4) = $608,400

In 2014, Eklund, Inc., issued for $103 per share, 70,000 shares of $100 par value convertible preferred stock. One share of preferred stock can be converted into three shares of Eklund's $25 par value common stock at the option of the preferred stockholder. In August 2015, all of the preferred stock was converted into common stock. The market value of the common stock at the date of the conversion was $30 per share. What total amount should be credited to additional paid-in capital from common stock as a result of the conversion of the preferred stock into common stock?

$7,210,000 - (70,000 × 3 × $25) = $1,960,000

On June 30, 2014, Yang Corporation granted compensatory stock options for 25,000 shares of its $24 par value common stock to certain of its key employees. The market price of the common stock on that date was $31 per share and the option price was $28. Using a fair value option pricing model, total compensation expense is determined to be $80,000. The options are exercisable beginning January 1, 2016, providing those key employees are still in the employ of the company at the time the options are exercised. The options expire on June 30, 2017. On January 4, 2016, when the market price of the stock was $36 per share, all options for the 25,000 shares were exercised. The service period is for two years beginning January 1, 2014. Using the fair value method, what should be the amount of compensation expense recorded by Yang Corporation for these options on December 31, 2014?

$80,000 / 2 = $40,000.

An analysis of stockholders' equity of Hahn Corporation as of January 1, 2014, is as follows: Common stock, par value $20; authorized 100,000 shares; issued and outstanding 90,000 shares $1,800,000 Paid-in capital in excess of par 800,000 Retained earnings 760,000 Total $3,360,000 Hahn uses the cost method of accounting for treasury stock and during 2014 entered into the following transactions: Acquired 2,500 shares of its stock for $75,000. Sold 2,000 treasury shares at $35 per share. Sold the remaining treasury shares at $20 per share. Assuming no other equity transactions occurred during 2014, what should Hahn report at December 31, 2014, as total additional paid-in capital?

$800,000 + (2,000 $5) - (500 $10) = $805,000

At December 31, 2014 Pine Company had 200,000 shares of common stock and 10,000 shares of 5%, $100 par value cumulative preferred stock outstanding. No dividends were declared on either the preferred or common stock in 2014 or 2015. On February 10, 2016, prior to the issuance of its financial statements for the year ended December 31, 2015, Pine declared a 100% stock dividend on its common stock. Net income for 2015 was $800,000. In its 2015 financial statements, Pine's 2015 earnings per common share should be

$800,000 - (10,000 $100 .05)] (200,000 2) = $1.88.

Sealy Corporation had the following information in its financial statements for the years ended 2014 and 2015: Cash dividends for the year 2015 $ 5,000 Net income for the year ended 2015 87,000 Market price of stock, 12/31/14 10 Market price of stock, 12/31/15 12 Common stockholders' equity, 12/31/14 1,000,000 Common stockholders' equity, 12/31/15 1,200,000 Outstanding shares, 12/31/15 100,000 Preferred dividends for the year ended 2015 10,000 What is the rate of return on common stock equity for Sealy Corporation for the year ended 2015?

$87,000 - $10,000) ÷ [($1,000,000 + $1,200,000)2] = 7.0%

In order to retain certain key executives, Jensen Corporation granted them incentive stock options on December 31, 2014. 90,000 options were granted at an option price of $35 per share. Market prices of the stock were as follows: December 31, 2015 $46 per share December 31, 2016 51 per share The options were granted as compensation for executives' services to be rendered over a two-year period beginning January 1, 2015. The Black-Scholes option pricing model determines total compensation expense to be $900,000. What amount of compensation expense should Jensen recognize as a result of this plan for the year ended December 31, 2015 under the fair value method?

$900,000 ÷ 2 = $450,000

The stockholders' equity section of Gunkel Corporation as of December 31, 2014, was as follows: Common stock, par value $2; authorized 20,000 shares; issued and outstanding 10,000 shares $ 20,000 Paid-in capital in excess of par 30,000 Retained earnings 95,000 $145,000 On March 1, 2015, the board of directors declared a 15% stock dividend, and accordingly 1,500 additional shares were issued. On March 1, 2015, the fair value of the stock was $6 per share. For the two months ended February 28, 2015, Gunkel sustained a net loss of $15,000. What amount should Gunkel report as retained earnings as of March 1, 2015?

$95,000 - $15,000 - (1,500 * $6) = $71,000.

Fogel Co. has $3,000,000 of 8% convertible bonds outstanding. Each $1,000 bond is convertible into 30 shares of $30 par value common stock. The bonds pay interest on January 31 and July 31. On July 31, 2014, the holders of $960,000 bonds exercised the conversion privilege. On that date the market price of the bonds was 105 and the market price of the common stock was $36. The total unamortized bond premium at the date of conversion was $210,000. Fogel should record, as a result of this conversion, a

$960,000 + ($210,000 × .32) - (1,600 × 30 × $30) = $163,200

On January 2, 2015, Worth Co. issued at par $1,000,000 of 7% convertible bonds. Each $1,000 bond is convertible into 20 shares of common stock. No bonds were converted during 2015. Worth had 200,000 shares of common stock outstanding during 2015. Worth's 2015 net income was $450,000 and the income tax rate was 30%. Worth's diluted earnings per share for 2015 would be (rounded to the nearest penny):

($1,000,000 * $1,000) * 20 = 20,000 $1,000,000 * .07 * (1 - .30) = $49,000 ($450,000 + $49,000) / (200,000 + 20,000) = $2.27.

On May 1, 2014, Marly Co. issued $1,500,000 of 7% bonds at 103, which are due on April 30, 2024. Twenty detachable stock warrants entitling the holder to purchase for $40 one share of Marly's common stock, $15 par value, were attached to each $1,000 bond. The bonds without the warrants would sell at 96. On May 1, 2014, the fair value of Marly's common stock was $35 per share and of the warrants was $2. On May 1, 2014, Marly should record the bonds with a

($1,500,000 * .96) + (1,500 * 20 * $2) = $1,500,000 ($1,440,000 / $1,500,000) * ($1,500,000 * 1.03) = $1,483,200 $1,500,000 - $1,483,200 = $16,800.

On March 1, 2014, Ruiz Corporation issued $1,500,000 of 8% nonconvertible bonds at 104, which are due on February 28, 2034. In addition, each $1,000 bond was issued with 25 detachable stock warrants, each of which entitled the bondholder to purchase for $50 one share of Ruiz common stock, par value $25. The bonds without the warrants would normally sell at 95. On March 1, 2014, the fair value of Ruiz's common stock was $40 per share and the fair value of the warrants was $2.00. What amount should Ruiz record on March 1, 2014 as paid-in capital from stock warrants?

($1,500,000 × .95) + (1,500 × 25 × $2) = $1,500,000; $1,500,000 × 1.04 = $1,560,000 75000/1500000 * 1560000 = 78000

Morgan Corporation had two issues of securities outstanding: common stock and an 8% convertible bond issue in the face amount of $12,000,000. Interest payment dates of the bond issue are June 30th and December 31st. The conversion clause in the bond indenture entitles the bondholders to receive forty shares of $20 par value common stock in exchange for each $1,000 bond. On June 30, 2014, the holders of $1,800,000 face value bonds exercised the conversion privilege. The market price of the bonds on that date was $1,100 per bond and the market price of the common stock was $35. The total unamortized bond discount at the date of conversion was $750,000. In applying the book value method, what amount should Morgan credit to the account "paid-in capital in excess of par," as a result of this conversion?

($1,800,000 ÷ $1,000) × 40 × $20 = $1,440,000 (common stock) ($1,800,000 ÷ $12,000,000) × $750,000 = $112,500 (unamortized discount) $1,800,000 - $1,440,000 - $112,500 = $247,500.

Stinson Corporation owned 30,000 shares of Matile Corporation. These shares were purchased in 2011 for $270,000. On November 15, 2015, Stinson declared a property dividend of one share of Matile for every ten shares of Stinson held by a stockholder. On that date, when the market price of Matile was $28 per share, there were 270,000 shares of Stinson outstanding. What gain and net reduction in retained earnings would result from this property dividend? Gain Net Reduction in Retained Earnings a. $0 $243,000 b. $0 $756,000 c. $513,000 $108,000 d. $513,000 $243,000

($270,000 ÷ $10) * $28 = $756,000 [$28 - ($270,000 ÷ 30,000)] * 27,000 = $513,000 $756,000 - $513,000 = $243,000

On January 1, 2014, Korsak, Inc. established a stock appreciation rights plan for its executives. It entitled them to receive cash at any time during the next four years for the difference between the market price of its common stock and a pre-established price of $20 on 100,000 SARs. Current market prices of the stock are as follows: January 1, 2014 $35 per share December 31, 2014 38 per share December 31, 2015 30 per share December 31, 2016 33 per share Compensation expense relating to the plan is to be recorded over a four-year period beginning January 1, 2014 What amount of compensation expense should Korsak recognize for the year ended December 31, 2015?

($30 - $20) × 100,000 × .5 = $500,000 $500,000 - $450,000 = $50,000.

On January 1, 2014, Korsak, Inc. established a stock appreciation rights plan for its executives. It entitled them to receive cash at any time during the next four years for the difference between the market price of its common stock and a pre-established price of $20 on 100,000 SARs. Current market prices of the stock are as follows: January 1, 2014 $35 per share December 31, 2014 38 per share December 31, 2015 30 per share December 31, 2016 33 per share Compensation expense relating to the plan is to be recorded over a four-year period beginning January 1, 2014 On December 31, 2016, 25,000 SARs are exercised by executives. What amount of compensation expense should Korsak recognize for the year ended December 31, 2016?

($33 - $20) × 100,000 × .75 = $975,000 $975,000 - $500,000 = $475,000.

On January 1, 2014, Korsak, Inc. established a stock appreciation rights plan for its executives. It entitled them to receive cash at any time during the next four years for the difference between the market price of its common stock and a pre-established price of $20 on 100,000 SARs. Current market prices of the stock are as follows: January 1, 2014 $35 per share December 31, 2014 38 per share December 31, 2015 30 per share December 31, 2016 33 per share Compensation expense relating to the plan is to be recorded over a four-year period beginning January 1, 2014 What amount of compensation expense should Korsak recognize for the year ended December 31, 2014?

($38 - $20) × 100,000 × .25 = $450,000

Sealy Corporation had the following information in its financial statements for the years ended 2014 and 2015: Cash dividends for the year 2015 $ 5,000 Net income for the year ended 2015 87,000 Market price of stock, 12/31/14 10 Market price of stock, 12/31/15 12 Common stockholders' equity, 12/31/14 1,000,000 Common stockholders' equity, 12/31/15 1,200,000 Outstanding shares, 12/31/15 100,000 Preferred dividends for the year ended 2015 10,000 What is the payout ratio for Sealy Corporation for the year ended 2015?

($5,000) ÷ ($87,000 - $10,000) = 5.7%

Pember Corporation started business in 2009 by issuing 200,000 shares of $20 par common stock for $36 each. In 2014, 25,000 of these shares were purchased for $52 per share by Pember Corporation and held as treasury stock. On June 15, 2015, these 25,000 shares were exchanged for a piece of property that had an assessed value of $1,010,000. Pember's stock is actively traded and had a market price of $60 on June 15, 2015. The cost method is used to account for treasury stock. The amount of paid-in capital from treasury stock transactions resulting from the above events would be

($60 - $52) * 25,000 = $200,000

Pierson Corporation owned 10,000 shares of Hunter Corporation. These shares were purchased in 2011 for $90,000. On November 15, 2015, Pierson declared a property dividend of one share of Hunter for every ten shares of Pierson held by a stockholder. On that date, when the market price of Hunter was $28 per share, there were 90,000 shares of Pierson outstanding. What gain and net reduction in retained earnings would result from this property dividend? Gain Net Reduction in Retained Earnings a. $0 $252,000 b. $0 $ 81,000 c. $171,000 $ 81,000 d. $171,000 $ 36,000

($90,000 ÷ $10) * $28 = $252,000 [$28 - ($90,000 ÷ 10,000)] * 9,000 = $171,000 $252,000 - $171,000 = $81,000

On May 1, 2014, Payne Co. issued $900,000 of 7% bonds at 103, which are due on April 30, 2024. Twenty detachable stock warrants entitling the holder to purchase for $40 one share of Payne's common stock, $15 par value, were attached to each $1,000 bond. The bonds without the warrants would sell at 96. On May 1, 2014, the fair value of Payne's common stock was $35 per share and of the warrants was $2. On May 1, 2014, Payne should credit Paid-in Capital from Stock Warrants for

($900,000 × .96) + (18,000 × $2) = $900,000; $900,000 × 1.03 = $927,000 36000/900000 * 927000 = 37080

Berry Corporation has 50,000 shares of $10 par common stock authorized. The following transactions took place during 2014, the first year of the corporation's existence: Sold 10,000 shares of common stock for $13.50 per share. Issued 10,000 shares of common stock in exchange for a patent valued at $150,000. At the end of the Berry's first year, total paid-in capital amounted to

(10,000 * $13.50) + $150,000 = $285,000

Manning Company issued 10,000 shares of its $5 par value common stock having a fair value of $25 per share and 15,000 shares of its $15 par value preferred stock having a fair value of $20 per share for a lump sum of $530,000. How much of the proceeds would be allocated to the common stock?

(10,000 * $25) + (15,000 * $20) = $550,000 ($250,000 ÷ $550,000) * $530,000 = $240,909

Melvern's Corporation has an investment in 15,000 shares of Wallace Company common stock with a cost of $654,000. These shares are used in a property dividend to stockholders of Melvern's. The property dividend is declared on May 25 and scheduled to be distributed on July 31 to stockholders of record on June 15. The fair value per share of Wallace stock is $63 on May 25, $66 on June 15, and $68 on July 31. The net effect of this property dividend on retained earnings is a reduction of

(15,000 * $63) = $945,000 $945,000 - ($945,000 - $654,000) = $654,000.

Gibbs Corporation owned 20,000 shares of Oliver Corporation's $5 par value common stock. These shares were purchased in 2011 for $180,000. On September 15, 2015, Gibbs declared a property dividend of one share of Oliver for every ten shares of Gibbs held by a stockholder. On that date, when the market price of Oliver was $28 per share, there were 180,000 shares of Gibbs outstanding. What NET reduction in retained earnings would result from this property dividend?

(180,000 ÷ 10) * $28 = $504,000 $504,000 - [$504,000 - ($180,000 * 18/20)] = $342,000.

Norton Company issues 4,000 shares of its $5 par value common stock having a fair value of $25 per share and 6,000 shares of its $15 par value preferred stock having a fair value of $20 per share for a lump sum of $210,000. What amount of the proceeds should be allocated to the preferred stock?

(4,000 * $25) + (6,000 * $20) = $220,000 ($120,000 ÷ $220,000) * $210,000 = $114,545

On April 7, 2014, Kegin Corporation sold a $4,000,000, twenty-year, 8 percent bond issue for $4,240,000. Each $1,000 bond has two detachable warrants, each of which permits the purchase of one share of the corporation's common stock for $30. The stock has a par value of $25 per share. Immediately after the sale of the bonds, the corporation's securities had the following market values: 8% bond without warrants $1,008 Warrants 21 Common stock 28 What accounts should Kegin credit to record the sale of the bonds? A. Bonds Payable $4,000,000 Premium on Bonds Payable 155,200 Paid-in Capital—Stock Warrants 84,800 b. Bonds Payable $4,000,000 Premium on Bonds Payable 32,000 Paid-in Capital—Stock Warrants 168,000 c. Bonds Payable $4,000,000 Premium on Bonds Payable 70,400 Paid-in Capital—Stock Warrants 169,600 d. Bonds Payable $4,000,000 Premiums on Bonds Payable 240,000

(4,000 × $1,008) + (8,000 × $21) = $4,200,000 4032000/4200000 * 4240000 =$4,070,400, bonds: $4,000,000 Premium: $70,400; 168000/4240000 *4240000 = $169,600

Masterson Company has 420,000 shares of $10 par value common stock outstanding. During the year Masterson declared a 15% stock dividend when the market price of the stock was $36 per share. Three months later Masterson declared a $.60 per share cash dividend. As a result of the dividends declared during the year, retained earnings decreased by

(420,000 * .15 * $36) + ($420,000 * 1.15 * $.60) = $2,683,800.

Percy Corporation was organized on January 1, 2014, with an authorization of 1,200,000 shares of common stock with a par value of $6 per share. During 2014, the corporation had the following capital transactions: January 5 issued 450,000 shares @ $10 per share July 28 purchased 60,000 shares @ $11 per share December 31 sold the 60,000 shares held in treasury @ $18 per share Percy used the cost method to record the purchase and reissuance of the treasury shares. What is the total amount of additional paid-in capital as of December 31, 2014?

(450,000 * $4) + (60,000 * $7) = $2,220,000.

On June 30, 2014, when Ermler Co.'s stock was selling at $65 per share, its capital accounts were as follows: Capital stock (par value $50; 50,000 shares issued) $2,500,000 Premium on capital stock 600,000 Retained earnings 4,200,000 If a 100% stock dividend were declared and distributed, capital stock would be

(50,000 * $50) + $2,500,000 = $5,000,000

Stine Inc. had 500,000 shares of common stock issued and outstanding at December 31, 2014. On July 1, 2015 an additional 500,000 shares were issued for cash. Stine also had stock options outstanding at the beginning and end of 2015 which allow the holders to purchase 150,000 shares of common stock at $28 per share. The average market price of Stine's common stock was $35 during 2015. The number of shares to be used in computing diluted earnings per share for 2015 is

(500,000 * 6/12) + (1,000,000 * 6/12) + [((35 - 28) / 35) * 150,000] = 780,000

Mingenback Company has 560,000 shares of $10 par value common stock outstanding. During the year Mingenback declared a 15% stock dividend when the market price of the stock was $48 per share. Two months later Mingenback declared a $.60 per share cash dividend. As a result of the dividends declared during the year, retained earnings decreased by:

(560,000 * .15 * $48) + (560,000 * 1.15 * $.60) = $4,418,400

Glavine Company issues 6,000 shares of its $5 par value common stock having a fair value of $25 per share and 9,000 shares of its $15 par value preferred stock having a fair value of $20 per share for a lump sum of $297,000. The proceeds allocated to the common stock is

(6,000 * $25) ÷ [(6,000 * $25) + (9,000 * $20)]] * $297,000 = $135,000

Winger Corporation owned 600,000 shares of Fegan Corporation stock. On December 31, 2014, when Winger's account "Equity Investments (Fegan Corporation") had a carrying value of $5 per share, Winger distributed these shares to its stockholders as a dividend. Winger originally paid $8 for each share. Fegan has 2,000,000 shares issued and outstanding, which are traded on a national stock exchange. The quoted market price for a Fegan share was $7 on the declaration date and $9 on the distribution date. What would be the reduction in Winger's stockholders' equity as a result of the above transactions?

(600,000 * $7) - [($7 - $5) * 600,000] = $3,000,000.

On July 4, 2014, Chen Company issued for $8,400,000 a total of 80,000 shares of $100 par value, 7% noncumulative preferred stock along with one detachable warrant for each share issued. Each warrant contains a right to purchase one share of Chen $10 par value common stock for $15 per share. The stock without the warrants would normally sell for $8,200,000. The market price of the rights on July 1, 2014, was $2.50 per right. On October 31, 2014, when the market price of the common stock was $19 per share and the market value of the rights was $3.00 per right, 32,000 rights were exercised. As a result of the exercise of the 32,000 rights and the issuance of the related common stock, what journal entry would Chen make? a. Cash ................................................................................... 480,000 Common Stock ....................................................... 320,000 Paid-in Capital in Excess of Par ............................. 160,000 b. Cash ................................................................................... 480,000 Paid-in Capital—Stock Warrants ........................................ 80,000 Common Stock ....................................................... 320,000 Paid-in Capital in Excess of Par ............................. 240,000 c. Cash ................................................................................... 480,000 Paid-in Capital—Stock Warrants ........................................ 200,000 Common Stock ....................................................... 320,000 Paid-in Capital in Excess of Par ............................. 360,000 d. Cash ................................................................................... 480,000 Paid-in Capital—Stock Warrants ........................................ 120,000 Common Stock ....................................................... 320,000 Paid-in Capital in Excess of Par ............................. 280,000

Dr. Cash: 32,000 × $15 = $480,000 Dr. Paid-in Capital—Stock Warrants: $200,000 × 32/80 = $80,000 Cr. Common Stock: 32,000 × $10 = $320,000 Cr. Paid-in Capital in Excess of Par: ($5 + $2.50) × 32,000 = $240,000

Beaty Inc. purchased Dunbar Co. and agreed to give stockholders of Dunbar Co. 10,000 additional shares in 2016 if Dunbar Co.'s net income in 2015 is $500,000; in 2014 Dunbar Co.'s net income is $520,000. Beaty Inc. has net income for 2014 of $400,000 and has an average number of common shares outstanding for 2014 of 100,000 shares. What should Beaty report as diluted earnings per share for 2014?

Since $520,000 = $500,000 include 10,000 shares in DEPS $400,000 / (100,000 + 10,000) = $3.64

Mays, Inc. had net income for 2014 of $1,060,000 and earnings per share on common stock of $5. Included in the net income was $150,000 of bond interest expense related to its long-term debt. The income tax rate for 2014 was 30%. Dividends on preferred stock were $200,000. The payout ratio on common stock was 25%. What were the dividends on common stock in 2014?

X/(1060000-200000) = .25, X = $215,

At December 31, 2014 Rice Company had 300,000 shares of common stock and 10,000 shares of 8%, $100 par value cumulative preferred stock outstanding. No dividends were declared on either the preferred or common stock in 2014 or 2015. On January 30, 2016, prior to the issuance of its financial statements for the year ended December 31, 2015, Rice declared a 100% stock dividend on its common stock. Net income for 2015 was $1,520,000. In its 2015 financial statements, Rice's 2015 earnings per common share should be

[$1,520,000 - (10,000 × $100 × .08)] ÷ (300,000 × 2) = $2.40

Hanson Co. had 200,000 shares of common stock, 20,000 shares of convertible preferred stock, and $1,000,000 of 5% convertible bonds outstanding during 2015. The preferred stock is convertible into 40,000 shares of common stock. During 2015, Hanson paid dividends of $.60 per share on the common stock and $2 per share on the preferred stock. Each $1,000 bond is convertible into 45 shares of common stock. The net income for 2015 was $400,000 and the income tax rate was 30%. Diluted earnings per share for 2015 is (rounded to the nearest penny)

[$400,000 + ($1,000,000 .05 .7)] / [200,000 + 40,000 + (1,000 45)] = $1.53.

Hanson Co. had 200,000 shares of common stock, 20,000 shares of convertible preferred stock, and $1,000,000 of 5% convertible bonds outstanding during 2015. The preferred stock is convertible into 40,000 shares of common stock. During 2015, Hanson paid dividends of $.60 per share on the common stock and $2 per share on the preferred stock. Each $1,000 bond is convertible into 45 shares of common stock. The net income for 2015 was $400,000 and the income tax rate was 30%. 108. Basic earnings per share for 2015 is (rounded to the nearest penny)

[$400,000 - (20,000 $2] / 200,000 = $1.80.

Vernon Corporation offered detachable 5-year warrants to buy one share of common stock (par value $5) at $20 (at a time when the stock was selling for $32). The price paid for 6,000, $1,000 bonds with the warrants attached was $615,000. The market price of the Vernon bonds without the warrants was $540,000, and the market price of the warrants without the bonds was $60,000. What amount should be allocated to the warrants?

[$60,000 ÷ ($60,000 + $540,000)] × $615,000 = $61,500.

Shipley Corporation had net income for the year of $600,000 and a weighted average number of common shares outstanding during the period of 250,000 shares. The company has a convertible bond issue outstanding. The bonds were issued four years ago at par ($2,500,000), carry a 7% interest rate, and are convertible into 50,000 shares of common stock. The company has a 40% tax rate. Diluted earnings per share are

[$600,000 + ($2,500,000 × .07 × .60)] ÷ (250,000 + 50,000) = $2.35

Kasravi Co. had net income for 2015 of $500,000. The average number of shares outstanding for the period was 200,000 shares. The average number of shares under outstanding options, at an option price of $30 per share is 12,000 shares. The average market price of the common stock during the year was $36. What should Kasravi Co. report for diluted earnings per share for the year ended 2015?

[($36 - $30) / $36] * 12,000 = 2,000 $500,000 * (200,000 + 2,000) = $2.48

The following information is available for Barone Corporation: January 1, 2015 Shares outstanding 2,000 April 1, 2015 Shares issued 320,000 July 1, 2015 Treasury shares purchased 120,000 October 1, 2015 Shares issued in a 100% stock dividend 2,200 The number of shares to be used in computing earnings per common share for 2015 is

[(2,000,000 × 3 × 2) + (2,320,000 × 3 × 2) + (2,200,000 × 3 × 2) + (4,400,000 × 3)] ÷ 12 = 4,360,000

On January 1, 2015, Gridley Corporation had 250,000 shares of its $2 par value common stock outstanding. On March 1, Gridley sold an additional 500,000 shares on the open market at $20 per share. Gridley issued a 20% stock dividend on May 1. On August 1, Gridley purchased 280,000 shares and immediately retired the stock. On November 1, 400,000 shares were sold for $25 per share. What is the weighted-average number of shares outstanding for 2015?

[(250,000 × 2 × 1.20) + (750,000 × 2 × 1.20) + (900,000 × 3) + (620,000 × 3) + (1,020,000 × 2)] ÷ 12 = 750,000.

Wheeler Company issued 5,000 shares of its $5 par value common stock having a fair value of $25 per share and 7,500 shares of its $15 par value preferred stock having a fair value of $20 per share for a lump sum of $264,000. The proceeds allocated to the preferred stock is

[(7,500 * $20) ÷ [(5,000 * $25) + (7,500 * $20)]] * $264,000 = $144,000

On May 1, 2014, Marly Co. issued $1,500,000 of 7% bonds at 103, which are due on April 30, 2024. Twenty detachable stock warrants entitling the holder to purchase for $40 one share of Marly's common stock, $15 par value, were attached to each $1,000 bond. The bonds without the warrants would sell at 96. On May 1, 2014, the fair value of Marly's common stock was $35 per share and of the warrants was $2. On May 1, 2014, Marly should credit Paid-in Capital from Stock Warrants for

1,500 * 20 * $2 = $60,000 ($60,000 / $1,500,000) * $1,545,000 = $61,800.

On January 1, 2014, Culver Corporation had 110,000 shares of its $5 par value common stock outstanding. On June 1, the corporation acquired 10,000 shares of stock to be held in the treasury. On December 1, when the market price of the stock was $10, the corporation declared a 15% stock dividend to be issued to stockholders of record on December 16, 2014. What was the impact of the 15% stock dividend on the balance of the retained earnings account?

100,000 * .15 * $10 = $150,000

At December 31, 2014, Hancock Company had 500,000 shares of common stock issued and outstanding, 400,000 of which had been issued and outstanding throughout the year and 100,000 of which were issued on October 1, 2014. Net income for the year ended December 31, 2014, was $1,360,000. What should be Hancock's 2014 earnings per common share, rounded to the nearest penny

1360000/ 400000 + (100000 * 3/12) = 3.20

The following data are provided: December 31, 2015 2014 5% Cumulative preferred stock, $50 par $100,000 $100,000 Common stock, $10 par 140,000 90,000 Additional paid-in capital 80,000 70,000 Retained earnings (includes current year net income) 240,000 215,000 Net income 60,000 Additional information: On May 1, 2015, 5,000 shares of common stock were issued. The preferred dividends were not declared during 2015. The market price of the common stock was $50 at December 31, 2015. The book value per share of common stock at 12/31/15 is calculated as

140000+80000+(240000-5000)/14000 = 455/14

Hill Corp. had 600,000 shares of common stock outstanding on January 1, issued 900,000 shares on July 1, and had income applicable to common stock of $1,470,000 for the year ending December 31, 2014. Earnings per share of common stock for 2014 would be

1470000/ 600000 + (900000 * 6/12) = 1.40

The stockholders' equity of Howell Company at July 31, 2014 is presented below: Common stock, par value $20, authorized 400,000 shares; issued and outstanding 160,000 shares $3,200,000 Paid-in capital in excess of par 160,000 Retained earnings 650,000 $4,010,000 On August 1, 2014, the board of directors of Howell declared a 10% stock dividend on common stock, to be distributed on September 15th. The market price of Howell's common stock was $70 on August 1, 2014, and $76 on September 15, 2014. What is the amount of the debit to retained earnings as a result of the declaration and distribution of this stock dividend?

160,000 * .10 * $70 = $1,120,000

Grimm Company has 2,400,000 shares of common stock outstanding on December 31, 2014. An additional 150,000 shares of common stock were issued on July 1, 2015, and 300,000 more on October 1, 2015. On April 1, 2015, Grimm issued 6,000, $1,000 face value, 8% convertible bonds. Each bond is convertible into 40 shares of common stock. No bonds were converted into common stock in 2015. What is the number of shares to be used in computing basic earnings per share and diluted earnings per share, respectively, for the year ended December 31, 2015?

2,400,000 + (150,000 × 6/12) + (300,000 × 3/12) = 2,550,000 2,550,000 + (6,000 × 40 × 9/12) = 2,730,000.

On January 1, 2014, Dodd, Inc., declared a 15% stock dividend on its common stock when the fair value of the common stock was $30 per share. Stockholders' equity before the stock dividend was declared consisted of: Common stock, $10 par value, authorized 200,000 shares; issued and outstanding 120,000 shares $1,200,000 Additional paid-in capital on common stock 150,000 Retained earnings 700,000 Total stockholders' equity $2,050,000 What was the effect on Dodd's retained earnings as a result of the above transaction?

20,000 * .15 * $30 = $540,000

Yoder, Incorporated, has 3,600,000 shares of common stock outstanding on December 31, 2014. An additional 800,000 shares of common stock were issued on April 1, 2015, and 400,000 more on July 1, 2015. On October 1, 2015, Yoder issued 20,000, $1,000 face value, 8% convertible bonds. Each bond is convertible into 20 shares of common stock. No bonds were converted into common stock in 2015. What is the number of shares to be used in computing basic earnings per share and diluted earnings per share, respectively?

3,600,000 + (800,000 × 9/12) + (400,000 × 6/12) = 4,400,000 (BEPS) 4,400,000 + (20,000 × 20 × 3/12) = 4,500,000 (DEPS).

Grant, Inc. had 60,000 shares of treasury stock ($10 par value) at December 31, 2014, which it acquired at $11 per share. On June 4, 2015, Grant issued 30,000 treasury shares to employees who exercised options under Grant's employee stock option plan. The market value per share was $13 at December 31, 2014, $15 at June 4, 2015, and $18 at December 31, 2015. The stock options had been granted for $12 per share. The cost method is used. What is the balance of the treasury stock on Grant's balance sheet at December 31, 2015?

30,000 × $11 = $330,000

Presented below is information related to Orender, Inc.: December 31, 2015 2014 Common stock $ 75,000 $ 60,000 4% Preferred stock 350,000 350,000 Retained earnings (includes net income for current year) 90,000 75,000 Net income for year 35,000 32,000 What is Orender's rate of return on common stock equity for 2015?

35000 - (.04*350000)/(60000+75000)+(75000+90000)/2 = .14

Luther Inc., has 4,000 shares of 6%, $50 par value, cumulative preferred stock and 100,000 shares of $1 par value common stock outstanding at December 31, 2015, and December 31, 2014. The board of directors declared and paid a $10,000 dividend in 2014. In 2015, $48,000 of dividends are declared and paid. What are the dividends received by the preferred stockholders in 2015?

4,000 * $50 * .06 = $12,000 ($12,000 - $10,000) + $12,000 = $14,000

Nolte Co. has 4,500,000 shares of common stock outstanding on December 31, 2014. An additional 200,000 shares are issued on April 1, 2015, and 480,000 more on September 1. On October 1, Nolte issued $6,000,000 of 9% convertible bonds. Each $1,000 bond is convertible into 40 shares of common stock. No bonds have been converted. The number of shares to be used in computing basic earnings per share and diluted earnings per share on December 31, 2015 is

4,500,000 + (200,000 × 9/12) + (480,000 × 4/12) = 4,810,000. 4,810,000 + [($6,000,000 ÷ $1,000) × 40 × 3/12] = 4,870,000

On December 1, 2014, Abel Corporation exchanged 40,000 shares of its $10 par value common stock held in treasury for a used machine. The treasury shares were acquired by Abel at a cost of $40 per share, and are accounted for under the cost method. On the date of the exchange, the common stock had a fair value of $55 per share (the shares were originally issued at $30 per share). As a result of this exchange, Abel's total stockholders' equity will increase by

40,000 * $55 = $2,200,000.

Gannon Company acquired 10,000 shares of its own common stock at $20 per share on February 5, 2014, and sold 5,000 of these shares at $27 per share on August 9, 2015. The fair value of Gannon's common stock was $24 per share at December 31, 2014, and $25 per share at December 31, 2015. The cost method is used to record treasury stock transactions. What account(s) should Gannon credit in 2015 to record the sale of 5,000 shares? a. Treasury Stock for $135,000. b. Treasury Stock for $100,000 and Paid-in Capital from Treasury Stock for $35,000. c. Treasury Stock for $100,000 and Retained Earnings for $35,000. d. Treasury Stock for $120,000 and Retained Earnings for $15,000

5,000 * $20 = $100,000; 5,000 * $7 = $35,000

Hernandez Company has 560,000 shares of $10 par value common stock outstanding. During the year, Hernandez declared a 10% stock dividend when the market price of the stock was $30 per share. Four months later Hernandez declared a $.50 per share cash dividend. As a result of the dividends declared during the year, retained earnings decreased by

560,000 * .10 × $30 = $1,680,000 $1,680,000 + (560,000 * 1.10 * $.50) = $1,988,000

Long Co. issued 100,000 shares of $10 par common stock for $1,200,000. A year later Long acquired 12,000 shares of its own common stock at $15 per share. Three months later Long sold 6,000 of these shares at $19 per share. If the cost method is used to record treasury stock transactions, to record the sale of the 6,000 treasury shares, Long should credit a. Treasury Stock for $114,000. b. Treasury Stock for $60,000 and Paid-in Capital from Treasury Stock for $54,000. c. Treasury Stock for $90,000 and Paid-in Capital from Treasury Stock for $24,000. d. Treasury Stock for $90,000 and Paid-in Capital in Excess of Par for $24,000

6,000 * $15 = $90,000; 6,000 * $4 = $24,000

Warrants exercisable at $20 each to obtain 60,000 shares of common stock were outstanding during a period when the average market price of the common stock was $25. Application of the treasury stock method for the assumed exercise of these warrants in computing diluted earnings per share will increase the weighted average number of outstanding shares by

60,000 × $20 ÷ $25 = 48,000 60,000 - 48,000 = 12,000

On June 30, 2014, Norman Corporation granted compensatory stock options for 50,000 shares of its $20 par value common stock to certain of its key employees. The market price of the common stock on that date was $36 per share and the option price was $30. The Black-Scholes option pricing model determines total compensation expense to be $600,000. The options are exercisable beginning January 1, 2015, provided those key employees are still in Norman's employ at the time the options are exercised. The options expire on June 30, 2016. On January 4, 2015, when the market price of the stock was $42 per share, all 50,000 options were exercised. What should be the amount of compensation expense recorded by Norman Corporation for the calendar year 2014 using the fair value method?

600000 * 12/30 = 240000

Milo Co. had 700,000 shares of common stock outstanding on January 1, issued 126,000 shares on May 1, purchased 63,000 shares of treasury stock on September 1, and issued 54,000 shares on November 1. The weighted average shares outstanding for the year is

700,000 + (126,000 × 8/12) - (63,000 × 4/12) + (54,000 × 2/12) = 772,000

Fultz Company had 300,000 shares of common stock issued and outstanding at December 31, 2014. During 2015, no additional common stock was issued. On January 1, 2015, Fultz issued 400,000 shares of nonconvertible preferred stock. During 2015, Fultz declared and paid $150,000 cash dividends on the common stock and $125,000 on the nonconvertible preferred stock. Net income for the year ended December 31, 2015, was $800,000. What should be Fultz's 2015 earnings per common share, rounded to the nearest penny?

800000 - 125000 / 300000 = 2.25

Terry Corporation had 480,000 shares of common stock outstanding at December 31, 2014. In addition, it had 90,000 stock options outstanding, which had been granted to certain executives, and which gave them the right to purchase shares of Terry's stock at an option price of $37 per share. The average market price of Terry's common stock for 2014 was $50. What is the number of shares that should be used in computing diluted earnings per share for the year ended December 31, 2014?

90,000 - (90,000 × $37 ÷ $50) = 23,400 480,000 + 23,400 = 503,400

Fugate Company had 900,000 shares of common stock issued and outstanding at December 31, 2014. On July 1, 2015 an additional 750,000 shares were issued for cash. Fugate also had stock options outstanding at the beginning and end of 2015 which allow the holders to purchase 225,000 shares of common stock at $20 per share. The average market price of Fugate's common stock was $25 during 2015. What is the number of shares that should be used in computing diluted earnings per share for the year ended December 31, 2015?

900,000 + (750,000 × 6/12) + [(25 - 20)/25 × 225,000] = 1,320,000

On May 1, 2014, Payne Co. issued $900,000 of 7% bonds at 103, which are due on April 30, 2024. Twenty detachable stock warrants entitling the holder to purchase for $40 one share of Payne's common stock, $15 par value, were attached to each $1,000 bond. The bonds without the warrants would sell at 96. On May 1, 2014, the fair value of Payne's common stock was $35 per share and of the warrants was $2. On May 1, 2014, Payne should record the bonds with a

900000 - (864000/900000)*927000 = 10,080

Chang Corporation issued $4,000,000 of 9%, ten-year convertible bonds on July 1, 2014 at 96.1 plus accrued interest. The bonds were dated April 1, 2014 with interest payable April 1 and October 1. Bond discount is amortized semiannually on a straight-line basis. On April 1, 2015, $800,000 of these bonds were converted into 500 shares of $20 par value common stock. Accrued interest was paid in cash at the time of conversion What was the effective interest rate on the bonds when they were issued? 9% b. Above 9% c. Below 9% d. Cannot determine from the information given.

B. Bonds issued at a discount, market rate > coupon rate.

Colt Corporation purchased Massey Inc. and agreed to give stockholders of Massey Inc. 50,000 additional shares in 2016 if Massey Inc.'s net income in 2015 is $600,000 or more; in 2014 Massey Inc.'s net income is $615,000. Colt has net income for 2014 of $1,000,000 and has an average number of common shares outstanding for 2014 of 500,000 shares. What should Colt report as earnings per share for 2014?

Basis: $1,000,000 ÷ 500,000 = $2.00. Diluted: $1,000,000 ÷ (500,000 + 50,000) = $1.82

On December 31, 2014, Houser Company granted some of its executives options to purchase 90,000 shares of the company's $50 par common stock at an option price of $60 per share. The Black-Scholes option pricing model determines total compensation expense to be $1,800,000. The options become exercisable on January 1, 2015, and represent compensation for executives' past and future services over a three-year period beginning January 1, 2015. What is the impact on Houser's total stockholders' equity for the year ended December 31, 2014, as a result of this transaction under the fair value method?

C. 1800000 - 1800000 * 2/3 = 600000