EXERCISE 16.13 (15–25 minutes)
1/1/18 No entry (total compensation cost is HK$450,000)
12/31/18 Compensation Expense …………………………….. 225,000
Share Premium—Share Options
(HK$450,000 X 1/2) ……………………………. 225,000
EXERCISE 16.14 (10–15 minutes)
(a) 1/1/19 Unearned Compensation …………………………... 120,000
Share Capital—Ordinary (4,000 X £5) ……. 20,000
Share Premium—Ordinary …………………… 100,000
EXERCISE 16.15 (10–15 minutes)
(a) 1/1/19 Unearned Compensation …………………………... 500,000
Share Capital—Ordinary (€10 X 10,000) … 100,000
Share Premium—Ordinary …………………… 400,000
EXERCISE 16.15 (Continued)
EXERCISE 16.16 (15–25 minutes)
(a) 2,640,000 shares
Jan. 1, 2019–Sept. 30, 2019 (2,400,000 X 9/12) ……. 1,800,000
(b) 4,140,000 shares
Jan. 1, 2020–Mar. 31, 2020 (2,640,000 X 3/12) ………. 660,000
Apr. 1, 2020–Dec. 31, 2020 (4,640,000 X 9/12) ……… 3,480,000
4,140,000
8,280,000
(d) 9,280,000 shares
Jan. 1, 2021–Mar. 31, 2021 (4,640,000 X 3/12) ………….. 1,160,000
EXERCISE 16.17 (10–15 minutes)
(a)
Event
Dates
Outstanding
Shares
Outstanding
Restatement
Fraction
of Year
Weighted
Shares
Beginning balance
Jan. 1–Feb. 1
480,000
1.2 X 3.0
1/12
144,000
Share dividend
720,000
3.0
2/12
360,000
Share split
4/12
620,000
Reissued shares
3/12
(b)
Earnings Per Share =
¥3,256,000,000 (Net Income)
= ¥1,679.22
1,939,000 (Weighted-Average Shares)
(d) Income from continuing operationsa ……………………….. ¥ 1,902.01
Loss from discontinued operationsb ……………………….. 222.80
Net income ……………………………………………………………. ¥ 1,679.21
EXERCISE 16.18 (10–15 minutes)
Event
Dates
Outstanding
Shares
Outstanding
Fraction
of Year
Weighted
Shares
Beginning balance
Jan. 1–May 1
210,000
4/12
70,000
Issued shares
May 1–Oct. 31
218,000
6/12
Reacquired shares
Oct. 31–Dec. 31
204,000
2/12
Weighted-average number of shares outstanding
EXERCISE 16.19 (10–15 minutes)
Event
Dates
Outstanding
Shares
Outstanding
Restatement
Fraction
of Year
Weighted
Shares
Beginning balance
Jan. 1–May 1
600,000
2
4/12
400,000
Reacquired shares
Aug. 1–Dec. 31
750,000
2
5/12
Net income ………………………………………………………………………… ¥2,200,000
Preference dividend (50,000 X ¥100 X 8%) …………………………... (400,000)
¥1,800,000
EXERCISE 16.20 (20–25 minutes)
Earnings per ordinary share:
Income data:
Income from continuing operations ……………………………… $15,000,000
Dates
Outstanding
Shares
Outstanding
Fraction
of Year
Weighted
Shares
January 1–April 1
7,000,000
3/12
1,750,000
April 1–December 31
8,000,000
9/12
6,000,000
Weighted-average number of shares outstanding
7,750,000
EXERCISE 16.21 (10–15 minutes)
Income from continuing operations before taxes …………………. €300,000
Income taxes …………………………………………………………………….. 120,000
EXERCISE 16.21 (Continued)
Dates
Outstanding
Shares
Outstanding
Fraction
of Year
Weighted
Shares
January 1–April 1
200,000
3/12
50,000
April 1–July 1
260,000
3/12
65,000
July 1–Oct. 1
340,000
3/12
85,000
Oct. 1–Dec. 31
370,000
3/12
Weighted-average number of shares outstanding
EXERCISE 16.22 (10–15 minutes)
Event
Dates
Outstanding
Shares
Outstanding
Fraction
of Year
Weighted
Shares
Beginning balance
Jan. 1–April 1
800,000
3/12
200,000
Issued shares
April 1–Oct. 1
1,250,000
6/12
625,000
Reacquired shares
1,140,000
3/12
EXERCISE 16.23 (20–25 minutes)
(a) Revenues ₺17,500
Expenses:
Other than interest ………………………………….. ₺8,400
(b) Revenues………………………………………………………. ₺17,500
Expenses:
Other than interest ………………………………….. ₺8,400
(c) Revenues………………………………………………………. ₺17,500
Expenses:
Other than interest ………………………………….. ₺8,400
Bond interest (75 X ₺950 X .10 X 1/2)….. 3,563
EXERCISE 16.24 (15–20 minutes)
(a) 1. Number of shares for basic earnings per share.
Dates
Outstanding
Shares
Outstanding
Fraction
of Year
Weighted
Shares
Jan. 1–April 1
800,000
3/12
200,000
April 1–Dec. 1
9/12
2. Number of shares for diluted earnings per share:
Dates
Outstanding
Shares
Outstanding
Fraction
of Year
Weighted
Shares
Jan. 1–April 1
800,000
3/12
200,000
(b) 1. Earnings for basic earnings per share:
After-tax net income ……………………………… €1,540,000
2. Earnings for diluted earnings per share:
After-tax net income ……………………………… €1,540,000
Add back interest on convertible
EXERCISE 16.25 (20–25 minutes)
(a) Net income for year …………………………………………………… $7,500,000
Add: Adjustment for interest (net of tax) ……………………. 208,000*
$7,708,000
*Interest expense ……………………………………………………… $ 320,000
(b) If the convertible security were preference shares, basic EPS would be
the same assuming there were no preference dividends declared and the
EXERCISE 16.26 (10–15 minutes)
(a) Net income ……………………………………………………………….. €240,000
Add: Interest savings (net of tax)
EXERCISE 16.26 (Continued)
(b) Shares outstanding ……………………………………………………….. 100,000
Add: Shares assumed to be issued (10,000* X 5) …………….. 50,000
EXERCISE 16.27 (20–25 minutes)
(a) Diluted
Shares assumed issued on exercise ……………………………….. 1,000
(b) Diluted
Shares assumed issued on exercise ……………………………….. 1,000
Proceeds = £8,000
EXERCISE 16.28 (10–15 minutes)
(a) The contingent shares would have to be reflected in diluted earnings
EXERCISE 16.29 (15–20 minutes)
(a) Diluted
The warrants are dilutive because the option price
(€10) is less than the average market price (€15).
(b) Basic EPS = €2.60
(€260,000 ÷ 100,000 shares)
*EXERCISE 16.30 (15–25 Minutes)
(a) Schedule of Compensation Expense Share Appreciation Rights
Cumulative
16–32 Copyright © 2018 Wiley Kieso, IFRS, 3/e, Solutions Manual (For Instructor Use Only)
*EXERCISE 16.31 (15–25 Minutes)
2022
Compensation Expense ………………………………………………….. 400,000
Liability Under Share-Appreciation Plan ……………………. 400,000
LO: 6, Bloom: AP, Difficulty: Moderate, Time: 15-25, AACSB: Analytic, AICPA BB: Critical Thinking, AICPA FC: Reporting, AICPA PC: Problem Solving
Copyright © 2018 Wiley Kieso, IFRS, 3/e, Solutions Manual (For Instructor Use Only) 16–33
TIME AND PURPOSE OF PROBLEMS
Problem 16.1 (Time 35–40 minutes)
Purpose—to provide the student with an opportunity to prepare entries to properly account for a series
of transactions involving the issuance and exercise of ordinary share rights and detachable share
Problem 16.2 (Time 30–35 minutes)
Purpose—to provide the student with an understanding of the entries to properly account for a share-
Problem 16.3 (Time 25–30 minutes)
Purpose—to provide the student with an understanding of the entries to properly account for a share
option and restricted share plan. The student is asked to identify the important features of an employee
share-purchase plan.
Problem 16.4 (Time 30–35 minutes)
Problem 16.5 (Time 30–35 minutes)
Purpose—to provide the student with an understanding of the proper computation of the weighted–
Problem 16.6 (Time 35–45 minutes)
Purpose—to provide the student with an opportunity to calculate the number of shares used to compute
basic and diluted earnings per share which is complicated by a share dividend, a share split, and
Problem 16.7 (Time 25–35 minutes)
Purpose—to provide the student with a problem with multiple dilutive securities which must be analyzed
to compute basic and diluted EPS.
Problem 16.8 (Time 30–40 minutes)
Purpose—to provide the student with an opportunity to calculate the weighted-average number of
SOLUTIONS TO PROBLEMS
PROBLEM 16.1
(a) 1. Memorandum entry made to indicate the number of rights issued.
2. Cash …………………………………………………………… 208,000
Bonds Payable …………………………………….. 192,000
Share Premium—Share Warrants ………….. 16,000
4. Share Premium—Share Warrants
(€16,000 X 80%) ………………………………………. 12,800
Cash* …………………………………………………………. 48,000
Share Capital—Ordinary (1,600 X €10)……. 16,000
Share Premium—Ordinary …………………….. 44,800
PROBLEM 16.1 (Continued)
6. For options exercised:
Cash (9,000 X €30)………………………………………. 270,000
Share Premium—Share Options
(90% X €100,000) …………………………………….. 90,000
Share Capital—Ordinary (9,000 X €10) …… 90,000
(b) Equity:
Share Capital—Ordinary €10 par value, authorized
1,000,000 shares, 320,100 shares
issued and outstanding …………………………... €3,201,000
Share Premium—Ordinary …………………………. 1,123,800
PROBLEM 16.2
2018 No journal entry would be recorded at the time the share option
2019 January 2
No entry
December 31
Compensation Expense ……………………………… 88,000
2020 December 31
Compensation Expense ……………………………… 80,000
Share Premium—Share Options …………… 80,000
2021 December 31
Cash (20,000 X $9) ……………………………………… 180,000
Share Premium—Share Options
PROBLEM 16.3
(a) 1/1/19 No entry
12/31/19 Compensation Expense (R$6 X 5,000 ÷ 5) …. 6,000
Share Premium—Share Options ……….. 6,000
(c) No change for part (a), unless the fair value of the options change.
For part (b):
1/1/19 Unearned Compensation (R$45 X 700) …….. 31,500
(d) Employee share-purchase plans generally permit all employees to pur–
chase shares at a discounted price. When employees purchase the
PROBLEM 16.4
The computation of Fitzgerald Pharmaceutical Industries’ basic earnings
per share and the diluted earnings per share for the fiscal year ended
June 30, 2019, are shown below.
(a)
Basic earnings per share
=
Net income – Preference dividends
Average ordinary shares outstanding
=
(b)
Diluted earnings per share
=
Net income – Preference dividends +
Interest (net of tax)
Average ordinary shares + Potentially
dilutive ordinary shares
=
PROBLEM 16.4 (Continued)
4Use treasury-share method to determine incremental
shares outstanding