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Jones Corp.'s capital structure was as follows: Outstanding shares of stock: Common 110,000 Preferred stock, $10 par, 10% cumulative 10,000 8% convertible bonds $ 1,000,000 During Year 2, Jones paid dividends of $1.00 per share on its preferred stock. The 8% bonds are convertible into 30,000 shares of common stock. Net income for Year 2 is $235,000. Assume that the income tax rate is 30%. The diluted earnings per share for Year 2 is:

Adjusted net income Net income $ 235,000 Add: Interest expense ($1,000,000 x 8%) 80,000 Less: Tax deduction eliminated (30%) (24,000) Adjusted net income $ 291,000 Adjusted shares outstanding Shares outstanding - common 110,000 Conversion of bonds 30,000 Adjusted shares outstanding 140,000 $291,000 - 10,000/ 140,000 = $2.01 The actual preferred stock dividend is deducted from net income to arrive at income available to common stockholders. If the preferred stock was convertible, we would have assumed no dividend was paid, and the converted common shares were outstanding as of the beginning of the year.

Which of the following should be reported as a prior period adjustment? A. Change in estimated lives of depreciable assets B. Change from unaccepted principle to accepted principle

B only Change in estimate = prospective (current and future), Change in principle = retrospective, Error = restate (like retrospective)

Kasravi Co. had net income for 2018 of $600,000. The average number of shares outstanding for the period was 200,000 shares. The 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 2018?

Basic = $600,000/ 200,000 = $3.00 Proceeds = 12,000 x$30 = 360,000 Treasury shares repurchased = 360,000/ 36 = 10,000 Incremental shares = 12,000 - 10,000 = 2,000 Diluted EPS = $600,000/ (200,000 + 2,000) = $2.97

On January 2, 2018, Worth Co. issued at par $2,000,000 of 7% convertible bonds. Each $1,000 bond is convertible into 10 shares of common stock. No bonds were converted during 2018. Worth had 150,000 shares of common stock outstanding during 2018. Worth's 2018 net income was $900,000 and the income tax rate was 30%. Worth's diluted earnings per share for 2018 would be:

Basic = $900,000/ 150,000 = $6.00 Net income = $900,000 Adjustment for interest net of taxes = $2,000,000 x 7% x (1-.30%) = 98,000 Adjusted net income = $998,000 Wt Avg shares adjustment = $2,000,000/ $1,000 x 10 shares = 20,000 shares Diluted EPS = $998,000/ (150,000 + 20,000) = $5.87

A company had the following outstanding shares as of January 1, Year 2: Preferred stock, $50 par, 4%, noncumulative 20,000 shares Common stock, $3 par 100,000 shares On September 1, Year 2, the company sold 15,000 shares of previously unissued common stock. No dividends were in arrears on January 1, Year 2, and no dividends were declared or paid during year 2. Net income for Year 2 totaled $240,000. What amount is basic earnings per share for the year ended December 31, Year 2?

Basic earnings per share is calculated using the following formula: Income available to common shareholders Weighted average number of common shares outstanding Step 1: The first step is to compute the income available to common shareholders. This amount is net income of $240,000. No adjustment for preferred dividends is necessary b/c the preferred stock is noncumulative and no dividend was declared. If the dividend had been declared or was cumulative, a deduction of $40,000 (4% × $50 × 20,000) would have been made. Step 2: The second step is to compute the weighted average number of common shares outstanding. This would be calculated as follows: Shares outstanding at the beginning of the period 100,000 shares Shares sold on Sept 1, Year 2 on a weighted basis (15,000 × 4/12) 5,000 shares Weighted average number of common shares outstanding for the entire period 105,000 shares Step 3: Step 3 is the calculation of the basic earnings per share, which is $240,000 / 105,000 shares = $2.29.

Which of the following is (are) the proper time period(s) to record the effects of a change in accounting estimate? Current period only

Changes in accounting estimates are reported prospectively, in the period of change and future periods if the change affects both.

On January 1, 2019, Janik Corp. acquired a machine at a cost of $900,000. It is to be depreciated on the straight-line method over a five-year period with no residual value. Because of a bookkeeping error, no depreciation was recognized in Janik's 2019 financial statements. The oversight was discovered during the preparation of Janik's 2020 financial statements. Assuming the bookkeeping error is material, depreciation expense on this machine for 2020 should be reported as

Correction of a material error is done retrospectively. 900,000/5 = 180,000

On June 1, 2020, Warren Company issued at 104, two hundred of its 6%, $1,000 bonds. Attached to each bond was one detachable stock warrant entitling the holder to purchase 10 shares of Warren's common stock. On June 1, 2020, the market value of the bonds, without the stock warrants, was 103, and the market value of each stock purchase warrant was $20. The journal entry to record the issuance of the bonds includes a credit to

Paid in Capital - Stock Warrants for 3,962 ($200,000 × 1.03) + (200 × $20) = $210,000; $200,000 × 1.04 = $208,000 206,000/ 210,000 x 208,000 = 204,038 4,000/ 210,000 x 208,000 = 3,962 Cash 208,000 Bonds Payable 200,000 Premium 4,038 PIC - stock warrants 3,962

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 basic earnings per common share should be

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

On January 1, 2018, Kiwi Computers Corp granted options to its new CEO, Morgan Price, to purchase 50,000 shares of $1.00 par value common stock for $20.00 per share. The options are exercisable after December 31, 2020 and expire on March 31, 2022. On the grant date, the market price of the stock was $19.00 per share. Using an acceptable valuation model, Kiwi determined that the options had a fair value of $750,000 on the grant date. The options vest over three years. a. Record the journal entry (if needed) on the stock options grant date, January 1, 2018. b. Record the journal entries (if needed) for 2018, 2019, and 2020 to record compensation expense. List each year separately. c. Record the journal entry assuming half of the options are exercised on January 1, 2021 when the market price of the stock is $25. d. Record the journal entry for the expiration of the options not exercised on March 1, 2022.

a) Record the journal entry (if needed) on the stock options grant date, January 1, 2018. No entry required. (1 point) b) Record the journal entries (if needed) for 2018, 2019, and 2020 to record compensation expense. December 31, 2018 (1 point per JE, 3 total.) Dr. Compensation expense (750,000/ 3yrs) 250,000 Cr. Paid-in-capital-stock option 250,000 December 31, 2019 Dr. Compensation expense 250,000 Cr. Paid-in-capital-stock option 250,000 December 31, 2020 Dr. Compensation expense 250,000 Cr. Paid-in-capital-stock option 250,000 c) Record the journal entry assuming half of the options are exercised on January 1, 2021. Dr. Cash (25,000 x $20) 500,000 Dr. Paid-in-capital-stock option (1/2 of 750,000) 375,000 Cr. Common stock - $1 par (25,000 x $1) 25,000 Cr. Paid-in-capital-common stock (balance JE) 850,000 d) Record the journal entry for the expiration of the options not exercised on March 1, 2022. Dr. Paid-in-capital-stock option 375,000 Cr. Paid-in-capital- expired stock option 375,000

A company that uses the last-in, first-out (LIFO) method of inventory pricing finds at an interim reporting date that there has been a partial liquidation of the base period inventory level. The decline is considered temporary and the partial liquidation is expected to be replaced prior to year-end. The amount shown as cost of sales at the interim reporting date should

include the expected cost of replacement of the liquidated LIFO base.

Proceeds from an issue of debt securities having stock warrants should not be allocated between debt and equity features when

the warrants issued with the debt securities are nondetachable.

On December 1, 2014, Lester Company issued at 98, 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 × 0.98 = $490,000 $475,000/ $500,000 × $490,000 = $465,500.

On January 1, 2018, Ritter Company granted stock options to officers and key employees for the purchase of 20,000 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, 2021 by grantees still employed by Ritter. The Black-Scholes option-pricing model determines total compensation expense to be $180,000. 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 2018 would include a credit to the Paid-in Capital—Stock Options account for

180,000/ 3 years = 60,000 expense per year Dr. Compensation expense 60,000 Cr. Paid-in capital stock options 60,000

Which of the following is a quantitative test to determine which operating segments are reportable segments. Revenue from external customers is 10% or more of consolidated revenue Absolute value of profit is 10% or more of the combined profit of all operating segments. 3. Assets are 10% or more of the combined assets of all operating segments.

3 is correct. The corrected descriptions for 1 and 2 are below. Revenue from external customers and intersegment sales is 10% or more of consolidated combined revenue, internal and external, of all operating segments. Absolute value of profit or loss is 10% or more of the greater, in absolute amount, of combined profit of all operating segments that did not report a loss or the combined loss of all operating segments that did report a loss.

Cokely Corp., which accounts for inventory using the LIFO method, had 1,000 units in beginning inventory at a cost of $30 and had purchased 700 more for $33. During the quarter, 1,300 units were sold. It is expected that the ending inventory at year end will be 800 units as Cokely anticipates purchasing additional units for $34. That is, the beginning inventory has been liquidated by 600 units, but 400 will be replenished. Determine the amount of cost of goods sold:

700 @ $33 new purchases 23,100 600 @ $30 orig cost 18,000 400 @ $4 excess (34-30) 1,600 42,700

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

= [(2,000,000 x 12/12) + (320,000 x 9/12) - (120,000 x 6/12)] x 2 = (2,000,000 + 240,000 - 60,000) x 2 = 4,360,000