Eugene Deimler - 536701

ACC335 Z1
Professor Weaver
Week 2 homework
Due: July 20, 2012
E16-11B
Date
2012
Jan
1
Jul

Dec

Description
No entry (total compensation is $1,250,000)
Paid-In Capital - Stock Options*
Compensation Expense

31 Compensation Expense
Paid-In Capital - Stock Options

2013
Dec 31 Compensation Expense
Paid-In Capital - Stock Options
2014
Mar

31 Cash
Paid-In Capital Stock Options
Common Stock
Paid-In Capital in excess of par - Common Stock
*20,000/250,000 X $1,250,000
Note: 100,000 options remain unexercised

Ref

Debit

Credit

100,000
100,000
625,000
625,000

625,000
625,000

11,180,000
650,000
130,000
11,170,000

E16-18B
Shares
Dates
Outstanding
Beginning Balances
Jan 1 - Apr 1
500,000
Issued Shares
Apr 1 - Oct 1
1,300,000
Issued 40% Stock Dividend
Oct 1 - Dec 31
1,820,000
Weighed average number of shares outstanding

Net Income

Preferred Dividend
Net income applicable to common stock

5,800,000
(800,000)

5,000,000

EPS of common stock = $5,000,000/1,540,000 = $3.25

Restatement
1.4
1.4

Fraction of
Year
1/4
1/2
1/4

Weighed
Average
175,000
910,000
455,000
1,540,000

E16-24B
Net income for year

Add adjustment for interest (after tax)

Calculation for interest adjustment

Maturity Value
Stated rate
Cash interest

525,000
$

27,385,000

10,000,000
9%
900,000

Premium amortization [((1.00-1.05)X10,000)) X 1/20)

Interest expense
1-tax rate (1-.4)
After tax interest expense

26,860,000

(25,000)
875,000
0.60
$

525,000

Basic EPS ($26,860,000/12,800,000 = $2.10

Diluted EPS ($27,385,000/12,920,000*= $2.12 there is no dilution of EPS, in fact the EPS is antidilutive
*Number of shares 10,000,000/1,000 = 10,000 X 12 = 120,000 + 12,800,000 = 12,920,000

b). If the security was convertible preferred stock, dividends would be subtracted from net income if t
Any expected shares which would come from conversion should be included in calculating weighted-a
the number of diluting shares would be the same as those calculated fro bonds, 12,920,000.

Kieso, E. Donald., Jerry J. Weygandt., Terry D. Warfield. Depreciation, Impairments, and Depletion. In

t the EPS is antidilutive and should not be reported (Kieso, Weygandt, Warfield 931)

= 12,920,000

ed from net income if the preferred stock is cumulative in nature.

calculating weighted-average shares outstanding,
12,920,000.

nts, and Depletion. Intermediate Accounting 14th ed. Hoboken, NJ: Wiley. 2012. Print.