EXERCISE 16.8 (10–15 minutes)
September 1, 2020
Cash ($4,160,000 + $90,000) ……………………………… 4,250,000
Bonds Payable (4,000 X $1,000) ………………….. 4,000,000
Schedule 1
Premium on Bonds Payable and Value of Stock Warrants
Sales price (4,000 X $1,040) $4,160,000
Schedule 2
Accrued Bond Interest to Date of Sale
Face value of bonds $4,000,000
EXERCISE 16.9 (10–15 minutes)
(a) Cash ($2,000,000 X 1.02) …………………….. 2,040,000
EXERCISE 16.9 (Continued)
(b) Market value of bonds without warrants $1,960,000
($2,000,000 X .98)
Market value of warrants (2,000 X $30) 60,000
Total market value $2,020,000
EXERCISE 16.10 (15–25 minutes)
January 2, 2021
No entry (total compensation cost is $450,000)
EXERCISE 16.10 (Continued)
January 3, 2023
Cash (20,000 X $40) ………………………………. 800,000
(Note to instructor: The market price of the stock has no relevance in the
prior entry and the following one.)
May 1, 2023
Cash (10,000 X $40) ……………………………………. 400,000
Paid-in Capital—Stock Options …………………… 150,000
EXERCISE 16.11 (15–25 minutes)
January 1, 2021
No entry
December 31, 2021
Compensation Expense ……………………………… 175,000
EXERCISE 16.11 (Continued)
April 1, 2022
December 31, 2022
March 31, 2023
Cash (12,000 X $25) ……………………………………. 300,000
Paid-in Capital—Stock Options …………………… 210,000
EXERCISE 16.12 (15–25 minutes)
January 1, 2019
No entry
December 31, 2019
Compensation Expense ……………………….. 200,000
EXERCISE 16.2 (Continued)
May 1, 2021
Cash (8,000 X $20) ………………………………… 160,000
Paid-in Capital—Stock Options ……………… 320,000*
EXERCISE 16.13 (10–15 minutes)
January 1, 2020
(a) Unearned Compensation …………………………. 120,000
March 4, 2022
(b) Common Stock ……………………………………….. 20,000
Paid-in Capital Excess of Par—
EXERCISE 16.14 (10–15 minutes)
January 1, 2020
(a) Unearned Compensation …………………………. 500,000
Common Stock ($10 X 10,000) ……………. 100,000
Paid-in Capital in Excess of Par—
Common Stock ……………………………….. 400,000
EXERCISE 16.15 (15–25 minutes)
(a) 2,200,000 shares
Jan. 1, 2019–Sept. 30, 2019 (2,000,000 X 9/12) 1,500,000
Retroactive adjustment for stock dividend X 1.10
(b) 3,700,000 shares
Jan. 1, 2020–Mar. 31, 2020 (2,200,000 X 3/12) 550,000
Apr. 1, 2020–Dec. 31, 2020 (4,200,000 X 9/12) 3,150,000
3,700,000
EXERCISE 16.15 (Continued)
(d) 8,400,000 shares
Jan. 1, 2021–Mar. 31, 2021 (4,200,000 X 3/12) 1,050,000
Retroactive adjustment for stock split X 2
EXERCISE 16.16 (10–15 minutes)
(a)
Event
Dates
Outstanding
Shares
Outstanding
Restatement
Fraction
of Year
Beginning balance
Jan. 1–Feb. 1
480,000
1.1 X 3.0
1/12
Stock dividend
Mar. 1–May 1
2/12
Reissued shares
Oct. 1–Dec. 31
3/12
(b)
Earnings Per Share =
$3,456,000 (Net Income)
= $1.96
1,762,000 (Weighted-average Number
Shares Outstanding)
EXERCISE 16.16 (Continued)
a$3,888,000
= $2.21
1,762,000
= $(.25)
1,762,000
EXERCISE 16-17 (12–15 minutes)
Event
Dates
Outstanding
Shares
Outstanding
Fraction
of Year
Weighted
Shares
Beginning balance
Jan. 1–May 1
200,000
4/12
66,667
Issued shares
May 1–Oct. 31
208,000
6/12
104,000
Reacquired shares
Oct. 31–Dec. 31
194,000
2/12
EXERCISE 16.18 (10–15 minutes)
Event
Dates
Outstanding
Shares
Outstanding
Restatement
Fraction
of Year
Weighted
Shares
Beginning balance
Jan. 1–May 1
750,000
2
4/12
500,000
Reacquired shares
Aug. 1–Dec. 31
900,000
2
5/12
EXERCISE 16.18 (Continued)
Net income applicable to common stock
$2,100,000
Weighted-average number of shares outstanding
EXERCISE 16.19 (20–25 minutes)
Earnings per share of common stock:
Income from continuing operations* $1.78
Loss from discontinued operations, net of tax** (.16)
Net income*** $1.62
Income data:
Income from continuing operations $15,000,000
Dates
Outstanding
Shares
Outstanding
Fraction
of Year
Weighted
Shares
January 1–April 1
7,500,000
3/12
1,875,000
April 1–December 31
8,500,000
9/12
6,375,000
Weighted-average number of shares outstanding
8,250,000
*$14,700,000 ÷ 8,250,000 shares = $1.78 per share
LO: 4, Bloom: AP, Difficulty: Simple, Time: 20-25, AACSB: Analytic, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None
EXERCISE 16.20 (10–15 minutes)
Income from continuing operations $300,000
EXERCISE 16.20 (Continued)
Per share of common stock:
Income from continuing operations* $.84
Discontinued operations gain, net of tax** .25
Net income*** $1.09
Dates
Outstanding
Shares
Outstanding
Fraction
of Year
Weighted
Shares
January 1–April 1
200,000
3/12
50,000
April 1–July 1
250,000
3/12
62,500
July 1–Oct. 1
330,000
3/12
82,500
Oct. 1–Dec 31.
360,000
3/12
Weighted-average number of shares outstanding
$300,000 – preferred dividends of $60,000
(6% of $1,000,000) = $240,000 (income available to common stockholders)
EXERCISE 16.21 (10–15 minutes)
Event
Dates
Outstanding
Shares
Outstanding
Fraction
of Year
Weighted
Shares
Beginning balance
Jan. 1–April 1
900,000
3/12
225,000
Issued shares
April 1–Oct. 1
6/12
675,000
Reacquired shares
Oct. 1–Dec. 31
3/12
adjusted 1,270,500
EXERCISE 16.21 (Continued)
Net income $2,530,000
Preferred dividend (280,000 X $50 X 7%) (980,000)
$1,550,000
EXERCISE 16.22 (20–25 minutes)
(a) Revenues $17,500
Expenses:
Other than interest $8,400
Bond interest (60 X $1,000 X .08) 4,800 13,200
2,000 + 6,000
8,000
(b) Revenues $17,500
Expenses:
Other than interest $8,400
Bond interest (60 X $1,000 X .08 X 4/12) 1,600 10,000
4,000
EXERCISE 16.22 (Continued)
(c) Revenues $17,500
Expenses:
Other than interest $8,400
Bond interest (60 X $1,000 X .08 X 1/2) 2,400
Bond interest (40 X $1,000 X .08 X 1/2) 1,600 12,400
EXERCISE 16.23 (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
EXERCISE 16.23 (Continued)
(2) Number of shares for diluted earnings per share:
Dates
Outstanding
Shares
Outstanding
Fraction
of Year
Weighted
Shares
(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 16.24 (20–25 minutes)
(a) Net income for basic earnings per share $9,500,000
Add: Adjustment for interest (net of tax) 288,000*
Net income for diluted earnings per share $9,788,000
*Maturity value $5,000,000
Stated rate X 7%
Cash interest 350,000
(b) If the convertible security were preferred stock, basic EPS would be
EXERCISE 16.25 (10–15 minutes)
(a) Net income $400,000
Add: Interest savings (net of tax)
[$120,000 X (1 – .20)] 96,000
EXERCISE 16.25 (Continued)
Note: Basic EPS ($400,000 ÷ 100,000) = $4.00 which is greater than dilutive
EPS.
(b) Shares outstanding 100,000
Add: Shares assumed to be issued (10,000* X 5) 50,000
EXERCISE 16.26 (20–25 minutes)
(a) Diluted
Shares assumed issued on exercise 1,000
Proceeds (1,000 X $6 = $6,000)
(b) Diluted
Shares assumed issued on exercise 1,000
EXERCISE 16.27 (10–15 minutes)
(a) The contingent shares would have to be reflected in diluted earnings
EXERCISE 16.28 (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 = $3.60
($360,000 ÷ 100,000 shares)
LO: 6, Bloom: AP, Difficulty: Moderate, Time: 15-25, AACSB: Analytic, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None
*EXERCISE 16.30 (15–25 Minutes)
16-36 Copyright © 2019 WILEY Kieso, Intermediate Accounting, 17/e, Solutions Manual (For Instructor Use Only)
(a) Schedule of Compensation Expense Stock Appreciation Rights (30,000)
Date
Fair
Value
Cumulative
Compensation
Recognizable
Percentage
Accrued
Compensation
Accrued
to Date
Expense
2017
Expense
2018
Expense
2019
Expense
2020
Expense
2021
12/31/17
$ 6
$180,000
25%
$ 45,000
$45,000
50%
$202,500
15
75%
$(157,500)
100%
18
$540,000
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
Problem 16.2 (Time 45–50 minutes)
Purpose—to provide the student with an understanding of the entries to properly account for convertible
Problem 16.3 (Time 30–35 minutes)
Purpose—to provide the student with an understanding of the entries to properly account for a stock-
Problem 16.4 (Time 25–30 minutes)
Problem 16.5 (Time 30–35 minutes)
Problem 16.6 (Time 30–35 minutes)
Purpose—to provide the student with an understanding of the proper computation of the weighted–
Problem 16.7 (Time 35–45 minutes)
basic EPS.
Problem 16.8 (Time 25–35 minutes)
Purpose—to provide the student with a problem with multiple dilutive securities which must be analyzed
Problem 16.9 (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
2. Cash ……………………………………………………….. 208,000
Discount on Bonds Payable* ……………………. 8,000
Bonds Payable ………………………………….. 200,000
Paid-in Capital—Stock Warrants** ……… 16,000
3. Cash* ………………………………………………………. 304,000
Common Stock (9,500 X $10) ……………… 95,000
4. Cash* ………………………………………………………. 48,000
Paid-in Capital—Stock Warrants