Problem 19–7
Requirement 1
No entry until the end of the reporting period, but compensation must be
estimated at the grant date:
options fair estimated
expected value total
to vest per option compensation
Requirement 2
December 31, 2018, 2019, 2020, 2021 ($ in millions)
Requirement 3
If, after two years, LCI estimates that it is not probable that the performance goals
will be met, then the new estimate of the total compensation would change to:
options fair estimated
expected value total
to vest per option compensation
In that case, LCI would reverse the $6 million expensed in 2018–2019 because no
compensation can be recognized for options that don’t vest due to performance
targets not being met, and that’s the new expectation.
December 31, 2020 ($ in millions)
December 31, 2021
No entry
1. Net loss per share for the year ended December 31, 2018:
(amounts in millions, except per share amount)
net preferred Net Loss
loss dividends Per Share
—————————————————————————— = ——— =
shares treasury new
at Jan. 1 shares shares
___ stock dividend ___
adjustment
2. Per share amount of income or loss from continuing operations for the year
ended December 31, 2018:
(amounts in millions, except per share amount)
Income from
Continuing
operating preferred Operations
income dividends Per Share
shares treasury new
at Jan. 1 shares shares
___ stock dividend ___
adjustment
Problem 19–8
Problem 19–8 (concluded)
3. 2018 and 2017 comparative income statements:
(amounts in millions, except per share amount)
2018 2017
Earnings (Loss) Per Common Share:
Note: The weighted-average number of common shares in 2017 should be adjusted
for the stock dividend in 2018 for the purpose of reporting 2017 EPS in
subsequent years for comparative purposes:
net Earnings
income Per Share
shares stock dividend
at Jan. 1 adjustment
2016
net Net Loss
loss Per Share
shares
2017
net Earnings
income Per Share
shares retired
at Jan. 1 shares
2018
net Earnings
income Per Share
shares stock dividend
at Jan. 1 adjustment
Problem 19–9
*1,855,000 – 110,000 = 1,745,000 shares
** This is a 2% stock dividend: 34,900 ÷ 1,745,000 = 2%. Alternatively, the
additional 34,900 shares could be simply added to the 1,745,000 initial
shares outstanding.
(amounts in millions, except per share amount)
2016
net preferred Earnings
income dividends Per Share
shares new
at Jan. 1 shares
2017
net preferred Earnings
income dividends Per Share
shares retired
at Jan. 1 shares
___ stock split ___
adjustment
2018
net preferred Earnings
income dividends Per Share
shares stock dividend new
at Jan. 1 adjustment shares
(amounts in thousands, except per share amount)
Problem 19–10
Problem 19–11
net preferred Earnings
income dividends Per Share
shares new shares
at Jan. 1 shares retired
___ stock dividend ___
adjustment
The options issued in 2017 are not considered when
The options issued in 2018 do not affect the calculation of 2018 EPS for two
reasons related to their being issued at December 31. First, the exercise price ($32)
The options issued in 2016 are considered exercised for 8,000 shares when
shares
shares
Problem 19–12
Problem 19–12 (concluded)
(amounts in thousands, except per share amount)
Basic EPS
net preferred
income dividends
shares new shares
at Jan. 1 shares retired
___ stock dividend ___
adjustment
Diluted EPS
net preferred
income dividends
shares new shares assumed exercise
at Jan. 1 shares retired of options
___ stock dividend ___
Adjustment
The options issued in 2017 are not considered when
calculating 2018 EPS because the exercise price ($33) is not less than the 2017
average market price of $32. As a result, these options are antidilutive.
The options issued in 2018 do not affect the calculation of 2018 EPS for two
reasons related to their being issued at December 31. First, the exercise price ($32)
Problem 19–13
The options issued in 2016 are considered exercised for 8,000 shares when
shares
Problem 19–13 (concluded)
(amounts in thousands, except per share amounts)
Basic EPS
net preferred
income dividends
shares new shares
at Jan. 1 shares retired
___ stock dividend ___
adjustment
Diluted EPS
net preferred
income dividends
shares new shares assumed exercise contingent conversion
at Jan. 1 shares retired of options shares of bonds
___ stock dividend ___
adjustment
* The contingently issuable shares are considered issued when calculating diluted
** The bonds are considered converted when calculating diluted EPS: 800 bonds