EXERCISE 16-8 (10–15 minutes)
SANDS COMPANY
Journal Entry
September 1, 2014
Cash ……………………………………………………………….. 4,220,000
Unamortized Bond Issue Costs…………………………. 30,000
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
Less: Face value of bonds 4,000,000
160,000
Schedule 2
Accrued Bond Interest to Date of Sale
Face value of bonds $4,000,000
Interest rate X 9%
Annual interest $ 360,000
Accrued interest for 3 months – ($360,000 X 3/12) $ 90,000
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)
1/2/15 No entry (total compensation cost is $450,000)
1/3/17 Cash (20,000 X $40) ……………………………… 800,000
Paid-in Capital—Stock Options …………….. 300,000
($450,000 X 20,000/30,000)
EXERCISE 16-10 (Continued)
(Note to instructor: The market price of the stock has no relevance in the
prior entry and the following one.)
5/1/17 Cash (10,000 X $40) ……………………………………. 400,000
Paid-in Capital—Stock Options …………………… 150,000
EXERCISE 16-11 (15–25 minutes)
1/1/15 No entry
12/31/15 Compensation Expense ……………………………… 175,000
compensation expense for 2015)
4/1/16 Paid-in Capital—Stock Options …………………… 17,500
Compensation Expense ……………………. 17,500
($175,000 X 2,000/20,000)
(To record termination of stock
options held by resigned employees)
Note: There are 6,000 options unexercised as of 3/31/17 (20,000 – 2,000 –
12,000).
EXERCISE 16-12 (15–25 minutes)
1/1/13 No entry
12/31/13 Compensation Expense ……………………….. 200,000
Paid-in Capital—Stock Options ………. 200,000
($400,000 X 1/2)
1/1/17 Paid-in Capital—Stock Options …………….. 80,000
Paid-in Capital—Expired Stock
Options ($400,000 – $320,000) …….. 80,000
EXERCISE 16-13 (10–15 minutes)
(a) 1/1/14 Unearned Compensation …………………………. 120,000
Common Stock (4,000 X $5) ……………….. 20,000
Paid-in Capital Excess of Par—
Common stock ……………………………….. 100,000
EXERCISE 16-14 (10–15 minutes)
(a) 1/1/14 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, 2013–Sept. 30, 2013 (2,000,000 X 9/12) 1,500,000
(b) 3,700,000 shares
Jan. 1, 2014–Mar. 31, 2014 (2,200,000 X 3/12) 550,000
Apr. 1, 2014–Dec. 31, 2014 (4,200,000 X 9/12) 3,150,000
3,700,000
(c) 7,400,000 shares
7,400,000
(d) 8,400,000 shares
Jan. 1, 2015–Mar. 31, 2015 (4,200,000 X 3/12) 1,050,000
EXERCISE 16-16 (10–15 minutes)
(a)
Event
Dates
Outstanding
Shares
Outstanding
Restatement
Weighted
Shares
Beginning balance
Jan. 1–Feb. 1
480,000
1.1 X 3.0
132,000
Stock dividend
Mar. 1–May 1
660,000
330,000
Stock split
June 1–Oct. 1
560,000
Reissued shares
Oct. 1–Dec. 31
435,000
1,762,000
(b)
Earnings Per Share =
$3,456,000 (Net Income)
= $1.96
1,762,000 (Weighted-average Number
Shares Outstanding)
(d) Income from continuing operationsa $1.72
Loss from discontinued operationsb (.25)
Income before extraordinary item 1.47
Extraordinary gainc .49
Net income $1.96
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
Reacquired shares
Oct. 31–Dec. 31
194,000
2/12
Weighted-average number of shares outstanding
EXERCISE 16-18 (10–15 minutes)
Event
Dates
Outstanding
Shares
Outstanding
Restatement
Fraction
of Year
Weighted
Shares
Net income $2,500,000
Preferred dividend (50,000 X $100 X 8%) (400,000)
$2,100,000
$2,100,000
EXERCISE 16-19 (20–25 minutes)
Earnings per share of common stock:
Income data:
Income before extraordinary item $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
EXERCISE 16-20 (10–15 minutes)
Income before income tax and extraordinary items $300,000
Income taxes 150,000
EXERCISE 16-20 (Continued)
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
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
Earnings per share for 2014:
Net income applicable to common stock
=
$1,550,000
= $1.22
Weighted-average number of shares outstanding
1,270,500
EXERCISE 16-22 (20–25 minutes)
(a) Revenues $17,500
Expenses:
(b) Revenues $17,500
Expenses:
Other than interest $8,400
(c) Revenues $17,500
Expenses:
Other than interest $8,400
Bond interest (60 X $1,000 X .08 X 1/2) 2,400
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
200,000
April 1–Dec. 1
(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
July 1–Dec. 31
6/12
(b) (1) Earnings for basic earnings per share:
After-tax net income $1,540,000
(2) Earnings for diluted earnings per share:
[Note to instructor: In this problem, the earnings per share computed for
basic earnings per share is $1.40 ($1,540,000 ÷ 1,100,000) and the diluted
EXERCISE 16-24 (20–25 minutes)
(a) Net income for year $9,500,000
Add: Adjustment for interest (net of tax) 234,000*
$9,734,000
*Maturity value $5,000,000
Stated rate X 7%
Earnings per share:
Basic EPS $9,500,000 ÷ 2,000,000 = $4.75
Diluted EPS $9,734,000 ÷ 2,090,000 = $4.66
(b) If the convertible security were preferred stock, basic EPS would be
EXERCISE 16-25 (10–15 minutes)
(a) Net income $300,000
Add: Interest savings (net of tax)
EXERCISE 16-25 (Continued)
(b) Shares outstanding 100,000
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
Proceeds = $6,000
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)
16–36 Copyright © 2013 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 15/e, Solutions Manual (For Instructor Use Only)
(a) Schedule of Compensation Expense Stock Appreciation Rights (150,000)
Date
Fair
Value
Cumulative
Compensation
Recognizable
Percentage
Accrued
Compensation
Accrued to Date
Expense
2011
Expense
2012
Expense
2013
Expense
2014
12/31/11
$4
$600,000
25%
$ 150,000
$150,000
(75,000)
$(75,000)
12/31/12
1
150,000
50%
75,000
1,050,000
$1,050,000
12/31/13
10
75%
1,125,000
225,000
$225,000
12/31/14
100%
$1,350,000
*EXERCISE 16-30 (15–25 Minutes)
Copyright © 2013 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 15/e, Solutions Manual (For Instructor Use Only) 16–37
(a) Schedule of Compensation Expense Stock Appreciation Rights (30,000)
Date
Fair
Value
Cumulative
Compensation
Recognizable
Percentage
Accrued
Compensation
Accrued
to Date
Expense
2011
Expense
2012
Expense
2013
Expense
2014
Expense
2015
12/31/11
$ 6
$180,000
25%
$ 45,000
$45,000
(b)
2011
Compensation Expense ………………………………………………………….. 45,000
Liability Under Stock Appreciation Plan …………………………….. 45,000
12/31/12
50%
$202,500
12/31/13
15
75%
$(157,500)
12/31/14
100%
12/31/15
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)
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)
Purpose—to provide the student with an understanding of the entries to properly account for a stock
option and restricted stock plan. The student is asked to identify the important features of an employee
stock-purchase plan.
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)
Purpose—to provide the student with an opportunity to calculate the number of shares used to compute
Problem 16-8 (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 16-9 (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
(a) 1. Memo Entry (memo entry made to indicate the number of rights
issued).
2. Cash ………………………………………………………… 208,000
Discount on Bonds Payable* …………………….. 8,000
X $208,000 = $192,000;
$96 + $8
**Allocated to Warrants:
$8
X $208,000 = $16,000
$96 + $8
3. Cash* ………………………………………………………. 304,000
4. Cash* ………………………………………………………. 48,000
Paid-in Capital—Stock Warrants
PROBLEM 16-1 (Continued)
5. Compensation Expense* ………………………….. 100,000
6. For options exercised:
Cash (9,000 X $30)……………………………………. 270,000
Paid-in Capital—Stock Options
(90% X $100,000) …………………………..………. 90,000
(b) Stockholders’ Equity:
Paid-in Capital:
Common Stock, $10 par value, authorized
1,000,000 shares, 320,100 shares
issued and outstanding ……………………. $3,201,000