Exercise Problem Chapter 16 (part 1)

1. For each of the unrelated transactions described below, present the entry(ies) required to
record each transaction:

A) Baden Corp. issued €5,000,000 par value 10% convertible bonds at 99. If the bonds
had not been convertible, the company’s investment banker determines that they
would have been sold at 95.

B) Fleming Company issued €5,000,000 par value 10% bonds at 98. One share warrant
was issued with each €100 par value bond. At the time of issuance, the warrants were
selling for €4. The net present value of the bonds without the warrants was €4,800,000.

C) Jackson, Inc. called its convertible debt in 2019. Assume the following related to the
transaction: The 11% €5,000,000 par value bonds were converted into 500,000
shares of €1 par value ordinary shares on July 1, 2019. The carrying amount of the
debt on July 1 was €4,800,000. The Share Premium––Conversion Equity account had
a balance of €100,000 and the company paid an additional €35,000 to the
bondholders to induce conversion of all the bonds. The company records the
conversion using the book value method.
2. On January 1, 2022, Warren Corporation had 1,000,000 ordinary shares outstanding. On
March 1, the corporation issued 150,000 new shares to raise additional capital. On July 1, the
corporation declared and issued a 2-for-1 share split. On October 1, the corporation purchased
on the market 600,000 of its own outstanding shares and retired them.

Instructions
Compute the weighted average number of shares to be used in computing earnings per share
for 2022.