Acct 300B - Ch. 16 Computational

c. $ 94,000.

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? a. $ 86,000. b. $ 90,000. c. $ 94,000. d. $180,000.

b. $28,800.

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? a. $31,200. b. $28,800. c. $15,600. d. $29,600.

b. Above 9%

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? a. 9% b. Above 9% c. Below 9% d. Cannot determine from the information given.

c. $16,640

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? a. $0 b. $16,000 c. $16,640 d. $15,808

a. credit of $163,200 to Paid-in Capital in Excess of Par.

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 a. credit of $163,200 to Paid-in Capital in Excess of Par. b. credit of $144,000 to Paid-in Capital in Excess of Par. c. credit of $67,200 to Premium on Bonds Payable. d. loss of $9,600.

c. $330,000

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? a. $210,000. b. $270,000. c. $330,000. d. $360,000

d. $1,960,000.

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? a. $1,190,000. b. $ 910,000. c. $1,750,000. d. $1,960,000.

a. $450,000.

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? a. $450,000. b. $900,000. c. $990,000. d. $3,150,000.

d. $ 600,000.

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? a. $2,100,000. b. $1,320,000. c. $1,200,000. d. $ 600,000.

b. $62,000

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? a. $65,000 b. $62,000 c. $72,000 d. $60,000

a. $ 247,500.

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? a. $ 247,500. b. $ 120,000. c. $1,080,000. d. $ 540,000.

c. Bonds Payable $4,000,000 Premium on Bonds Payable 70,400 Paid-in Capital—Stock Warrants 169,600

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

b. $489,250.

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 a. $484,100. b. $489,250. c. $500,000. d. $515,000.

c. $ 375,000 decrease.

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? a. $ 375,000 increase. b. $1,125,000 decrease. c. $ 375,000 decrease. d. $0.

c. $0

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? a. $1,800,000 decrease b. $600,000 decrease c. $0 d. $600,000 increase

c. $90,000 decrease

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? a. $90,000 increase b. $0 c. $90,000 decrease d. $270,000 decrease

a. $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. 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? a. $475,000 b. $325,000 c. $975,000 d. $130,000

b. $ 450,000

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? a. $ 300,000 b. $ 450,000 c. $ 375,000 d. $1,800,000

b. $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. What amount of compensation expense should Korsak recognize for the year ended December 31, 2015? a. $0 b. $50,000 c. $500,000 d. $250,000 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? a. $0 b. $50,000 c. $500,000 d. $250,000

c. $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 a. $4,000. b. $3,600. c. $1,800. d. $0.

b. $1,800.

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 a. $0. b. $1,800. c. $3,600 d. $4,200

c. $ 7,500.

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 a. $27,000. b. $22,500. c. $ 7,500. d. $ 4,500.

d. $45,000.

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 a. $0. b. $27,000. c. $30,000. d. $45,000.

b. $1,500.

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 a. $4,500. b. $1,500. c. $1,125. d. $0.

b. a $5,400 increase in paid-in capital in excess of par.

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 a. no change in paid-in capital in excess of par. b. a $5,400 increase in paid-in capital in excess of par. c. a $10,800 increase in paid-in capital in excess of par. d. a $7,200 increase in paid-in capital in excess of par.

b. Cash 480,000 Paid-in Capital—Stock Warrants 80,000 Common Stock 320,000 Paid-in Capital in Excess of Par 240,000

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 .....

b. $240,000.

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? a. $0. b. $240,000. c. $300,000. d. $600,000.

b. $40,000

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? a. $80,000 b. $40,000 c. $18,750 d. $0

c. $78,000

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? a. $55,200 b. $63,900 c. $78,000 d. $75,000

b. $ 61,800

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 a. $105,000 b. $ 61,800 c. $ 60,000 d. $ 57,600

c. discount of $16,800.

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 a. discount of $60,000. b. discount of $15,000. c. discount of $16,800. d. premium of $45,000

c. $37,080.

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 a. $34,560. b. $36,000. c. $37,080. d. $63,000

b. discount of $10,080.

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 a. discount of $36,000. b. discount of $10,080. c. discount of $ 9,000. d. premium of $27,000.

b. $61,500

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? a. $60,000 b. $61,500 c. $72,000 d. $75,000

c. $140,000.

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 a. $0. b. $70,000. c. $140,000. d. $210,000.