E16-16B (Continued)
(d) Income from continuing operationsa $1.06
Loss from discontinued operationsb (0.08)
Net income $0.98
a Net income available for common $6,552,000
E16-17B (12–15 minutes)
Event
Dates
Outstanding
Shares
Outstanding
Fraction
of Year
Beginning balance
Jan. 1–Apr. 1
600,000
3/12
Reacquired shares
Apr. 1–Jul. 31
585,000
4/12
Weighted-average number of shares outstanding
E16-18B (10–15 minutes)
Event
Dates
Outstanding
Shares
Outstanding
Restatement
Fraction
of Year
Weighted
Shares
Beginning balance
Jan. 1–Apr 1
500,000
1.4
3/12
175,000
Issued shares
Apr 1–Oct. 1
1.4
6/12
910,000
Weighted-average number of shares outstanding
E16-19B (20–25 minutes)
Earnings per share of common stock:
Income data:
Income before extraordinary item ……………………………….. $53,500,000
Deduct 6% dividend on preferred stock ………………………. 2,000,000
E16-20B (10–15 minutes)
Income before income tax ………………………………………………. $9,862,000
Income taxes …………………………..……………………………………… 3,944,800
Net income …………………………………………………………………….. $5,917,200
Per share of common stock:
Net income*** $6.70
Dates
Outstanding
Shares
Outstanding
Fraction
of Year
Weighted
Shares
Jan. 1–Feb. 1
600,000
1/12
50,000
Jun. 1–Nov. 1
880,000
5/12
E16-21B (10–15 minutes)
Event
Dates
Outstanding
Shares
Outstanding
Restate-
ment
Fraction
of Year
Weighted
Shares
Beginning balance
Jan. 1–Mar. 1
600,000
1.10
2/12
110,000
Issued shares
Mar. 1–Jul. 1
1.10
4/12
513,333
Stock dividend
Jul. 1–Oct. 1
3/12
385,000
Issued shares
Oct. 1–Dec. 31
3/12
Net income $2,689,000
Preferred dividend (200,000 X $100 X 6%) (1,200,000)
$1,489,000
Earnings per share for 2014:
E16-22B (20–25 minutes)
(a) Revenues ………………………………………………….. $156,500
Expenses
Other than interest ………………………………. $104,000
Bond interest (500 X $1,000 X .06) ………… 30,000 134,000
(b) Revenues …………………………………………………….. $156,500
Expenses
Other than interest …………………………………. $104,000
(c) Revenues ……………………………………………………… $156,500
Expenses
Other than interest ………………………………….. $104,000
Bond interest (500 X $1,000 X .06 X 1/2) ……. 15,000
E16-23B (15–20 minutes)
(a) 1. Number of shares for basic earnings per share:
Dates
Outstanding
Shares
Outstanding
Fraction
of Year
Weighted
Shares
Jan. 1–Apr. 1
625,000
Apr. 1–Dec. 1
2. Number of shares for diluted earnings per share:
Dates
Outstanding
Shares
Outstanding
Fraction
of Year
Weighted
Shares
Jan. 1–Apr. 1
2,500,000
3/12
625,000
Apr. 1–Jul. 1
3,000,000
3/12
750,000
(b) 1. Earnings for basic earnings per share:
After-tax net income ………………………… $13,600,000
2. Earnings for diluted earnings per share:
After-tax net income ………………………… $13,600,000
E16-24B (20–25 minutes)
(a) Net income for year ……………………………………………….. $26,860,000
Add: Adjustment for interest (net of tax) ………………… 525,000*
$27,385,000
*Maturity value ………………………………………………………. $10,000,000
Stated rate …………………………………………………………… X 9%
$10,000,000/$1,000 = 10,000 debentures
Increase in diluted earnings per share denominator:
10,000
X 12
120,000
Earnings per share:
(b) If the convertible security were preferred stock, basic EPS would be the
same assuming there were no preferred dividends declared or the
preferred was noncumulative. For diluted EPS, the numerator would
be the net income amount, and the denominator would be 12,920,000.
E16-25B (10–15 minutes)
(a) Net income ………………………………………………………………. $ 8,680,000
Add: Interest savings (net of tax)
[$2,000,000 X (1 – .30)] …………………………………………… 1,400,000
(b) Shares outstanding ……………………………………………………. 2,650,000
Add: Shares assumed to be issued (500,000* X 2) ……….. 1,000,000
Shares outstanding adjusted for dilutive securities ……… 3,650,000
E16-26B (20–25 minutes)
(a) Diluted
Shares assumed issued on exercise ………………………………… 25,000
E16-26B (Continued)
(b) Oct. 1, 2014, issue Diluted
Shares assumed issued on exercise ………………………………… 10,000
E16-27B (10–15 minutes)
(a) Because the earnings level is not being currently attained, contingent
E16-28B (15–20 minutes)
(a) Dilutive
The warrants are dilutive because the option price necessary to acquire one
share of common stock ($30 for two warrants) is less than the average
market price ($32).
E16-28B (Continued)
(b) Basic EPS = $5.10
$2,650,000 ÷ 520,000 shares
(a)
Year
Market
Price
Exercis
e
Price
(250,000
SARs)
Cumulative
Expense
Recognizable
%
Accrued
Cumulative
Expense
Accrued to
Date
Current
Year
Expense
2013
$51
$50
$ 250,000
25%
$ 62,500
$ 62,500
2014
50%
2016
(b) SAR Liability ………………………………………………… 125,000
Compensation Expense (SAR) ………………. 125,000
*E16-30B (15–25 minutes)
(a)
Year
Market
Price
Exercise
Price
(50,000
SARs)
Cumulative
Expense
Recognizable
%
Accrued
Cumulative
Expense
Accrued to
Date
Current
Year
Expense
$19
$20
*E16-30B (Continued)
(b) 2014 No entry