1)

Issued
20323000 par value
12% convertible bonds at
if not convertible
95 Expenses of issusing
75000

2)

Issued

20323000 par value

12% bonds at

1 detachable stock warrant was issued with e

5
at time, warrants were selling for
3)

98

97
100 par value

Called convertible debt

13% 10149000 par value bonds were convertied in
1014900 shares of
1 par value common stock
59000 unamortized discount applicable to bonds paid an additional
using book value method

Calculations
1)
19916540

2)

3)

1)

Value of Bonds Plus Warrants

Value of Warrants
Value of Bonds
9075100

Cash
Discount on Bonds Payable
Bonds Payable
Unamortized Bond Issue Costs
Cash

2)

3)

19713310
1016150
18697160

19916540
406460

75000
75000

Cash
Discount on Bonds Payable
Bonds payable
Paid-in Capital-Stock Warrant

19713310
1625840

Debt Conversion Expense

Bonds Payable
Discount on Bonds Payable
Common Stock

82700
10149000

Paid-In Capita

Cash

1
20323000

1
20323000
1016150

59000
1014900
9075100
82700

onds were convertied into

82700

Jan 1 2015
29000 Shares
exercisable in
period for this award is

12 Par
5 years
2 years

April 1 2016
2900 options were terminated because of resigning employees
Market Value per share was

36

March 31 2017
17400 Options were exercised when the market price of the common stock was
12/31/2015 Paid-in Capital- Stock Options
4/1/2016 Compensation Expense
12/31/2016 Paid-in Capital- Stock Options
3/31/2017 Cash
Paid-in Capital- Stock Options
Unexerciesed Options

1/1/2015 No Entry
No Entry
12/31/2015 Compensation Expense
Paid-In Capital- Stock Options
4/1/2016 Paid-In Cpaital- Stock Options
Compensation Expense
12/31/2016 Compensation Expense
Paid-In Capital-Stock Options
3/31/2017 Cash
Paid-In Capital-Stock Options
Common Stock
Paid-in Capital in Excess of Par- Common Stock

0
0
203200
203200
20320
20320
182880
182880
365400
243840
208800
400440

at

21 per share

FV option total compensation

ck was

406400

42 per share
203200
20320
182880
365400
243840
8700

4460400
plus accrued interest

9%

10 year

Convertible Bonds
200718

Bonds Dated:
4/1/2014
Interest Payable
1-Apr and
1-Oct
G1 Month
6
B4 Month
4
4/1/2015 1672650 bonds were converted into
Accrued interest was paid in cash at the time of conversion.

on
1512

39600

a)

Prepare the entry to record interest expenses at

payable was credited when the bonds were issued.

b)

Prepare the entry to record the conversion on

4/1/2015
Assume that the entry to record amortization of the bond discount and interest paym
has been made.

a)

Interest Payable
Interest Expense
Discount on Bonds Payable
Cash

b)

Bonds Payable
Discount on Bonds Payable
Common Stock
Paid-in Capital i

10/1/2014

66906
135324
1512
200718
1672650
15309
712800
944541

6/1/2014

99

discount per month Issue Price Months Remaining

378
44604

shares of

118

18 par value common stock

assume that accrued interest

(Book Value Method is Used).

nd discount and interest payment

10 year
4630000
8%
1/2/2014
par value
1000
sold at
98
2014 Net Income
7500000
straightline basis
effective tax
35%
and
company had
2390000 shares outstanding during the entire year
Basic Earnings Per Share
Diluted Earnings Per Share

Net Income For Year

Add
Adj. Net Tax

4630 debentures
20
92600 shares

$3.14
$3.12

7500000
246779
7746779

Maturity value
Stated Rate
Cash Interest
Discount Amort:
Interest Expense
1-Tax Rate
After-Tax Interest

Current Conversion Ratio

in

ing the entire year

4630000
8%
370400
9260
379660
65%
246779

15 /
2 years 20 /

1
1

issuing
Warrants
value without warrants

a)

183700 Face Value of Bonds with coupon rate of

133440 issued
1 for each
33360 bonds sold in market at issuance for

Basic Formulas

Value Assigned to bonds

133440
133440 +

Value Assigned to Warrants

33360

33360
133440 +

33360
Total

Discount on Bonds Payable

a)

Cash
Discount on Bonds Payable
Bonds Payable

146000
66900
183700
29200

Paid-in Capital- Stock War

b)

Cash
Discount on Bonds Payable
Bonds Payable

146000
37700
183700

ds with coupon rate of

12%
100 sold

d in market at issuance for

146000

146000

116800

146000

29200
146000

otal
66900

5/1/2014 issued
3170
1000 bonds
at
102
each was issued with
1 detachable stock warrant.
After issuance the bonds were selling at
98 but fair vaule of the warrants cannot be determ
a)

Prepare the entry to record the issance of the bonds and the warrants
Cash
Discount on Bonds Payable
Bonds Payable
Paid-in Capital-Stock Warrant

b)

$3,233,400
$63,400
$3,170,000
$126,800

Assume the same facts as (a), except the Fair Value is

Cash
Discount on Bonds Payable
Bonds Payable
Paid-in Capital- Stock Warrant

1
$3,170,000
$70,993

Value Assigned to Bonds

3106600
69740
3176340
3162407

3233400

Value Assigned to Warrants

69740
3176340

22 Prepare the entry.

$3,233,400
$7,593

Market Value of Bonds without warrants

Market Value of Warrants
Total Market Value

3106600
3176340

70993
3233400
3233400

nts cannot be determined

repare the entry.

Issued
2940000 Convertible
10 year Bonds
Bond Provided for
14% Interest Payable
The discount in Connection with the issue was
The Bonds are Convertible after
for each

1 year into
1200 of bonds

8/1/2015
294000 of bonds were turned in for converstion into
At the time of conversion, the accrued interest on bonds being converted is paid in CASH

Prepare the Journal enteries to record the conversion, amortization, and interest in connection with the
a)
b)
c)

8/1/2015 (Book Value method is used)

8/31/2015
12/31/2015 (including closing entries for end-of-year)

a)

Discount on Bonds Payable

Common Stock
Paid-in Capital in Excess of Par- Common Stock
Cash

a)

Bonds Payable
Discount on Bonds Payable
Common Stock
Paid-in Capital in Excess- Co. Stk.

294000

Interest Payable
Cash
b)

Interest Expense
Interest Payable
Schedule 1
full amount to be Amortized
Monthly amount
months used
Balance on day before
Debenture converted
Balance on Day of
Remaining Monthly

Month in A/8

3430

297
30870

13.20

13

10%

Schedule 2
Amortization of bond discount charged to bond interest in year:
First part of year
7
330
8 end of year
5
297

Total
Interest on Bonds:
Beg
Monthly
Denbenture percent
Denbenture monthly

First part of year

end of year
total

b)

Interest would be
240100
154350
394450

Interest Expense
Discount on Bonds Payable
Interest Expense
Interest Payable

c)

Income Summary
Interest Expense

Total Interest
3795
394450
398245

297

30870

398245

on
7/1/2014
Semiannually on
1-Jan and
39600 Amortized monthly with Straight-line
8 share of

tion into
d in CASH

1-Jul

100 par value Common Stock

Common Stock Interest has been accrued monthly

t in connection with the bonds.

-year)

3531
196000
94469
3430

3531
196000
94469

3430

39600
330
4290
35310
(3531)
31779
297

ear:
2310
1485

3795

411600
34300
370440
30870

297

30870

398245

Determine the Basic and Diluted Earnings Per share

1)

Authorized to Issue
As of
12/31/2014

2)

The per share market prices of the common stock on selected dates were as follows:
7/1/2014
1/1/2015
4/1/2015
7/1/2015
8/1/2015
11/1/2015
12/31/2015

3)

A total of
7/1/2014
2098800 Par

7228800 shares
10
1807200 shares had been issued and were outstanding

20
21
25
11
10.5
9
10
699600 shares of an authorized
25 Cum. Dividend of

Conversion
1 preferred to
adjusted for splits and dividends
Dividends are quarterly

30-Sep

4)

Subject to a

5)

the after-tax net income for the year ended

31-Dec

31-Mar

40% income tax rate

12/31/2015

the following took place during the year

1)

1-Jan
903600 declared on

5% common stock dividend was issued.

12/1/2014 for all stockholders as of

12/29/2014

2)

1-Apr
411600 shares of the
new common was issued and old preferred was retired.

3)

1-Jul a 2 for 1 split of common stock became effective on this date.

was authorized on
1-Jun

4)

1-Aug

285600 shares of common stock were issued to acquire a factory build

5)

1-Nov
30800 shares of common stock were purchased on the open markert
per share
to be treasury stock, still held in treasury as of

6)

Common stock Cash Dividends

declared and paid as follows
15-Apr
0.3 per share
15-Oct
0.2 per share

7)

Preferred stock cash dividends

cash dividends were decalred and paid as schedule

a)

Event
Dates (outstanding)
Beg, Balanace (include
5% Stock Dividend)
1-Jan
Conversion of Preferred stock
1-Apr
Stock Split
(2 for 1)
1-Jul
Issued Shares for building
1-Aug
Purchase of Treasury Stock
1-Nov
Total number of Common Shares to Compute Basic

b)

Number of Share to Compute Basic Earnings Per Share

Convertible Preferred Stock - Still Outstanding
Convertible Preferred stock - Converted
Number of shares to compute diluted earnings per share

c)

After-tax net income

Preferred Stock Dividends
March 31
June 30
216000
Sept 30
216000
Dec 31
216000
Adjusted Net Income

12500000
524700

648000

1172700
11327300

par value
were outstanding

Common Stock

were as follows:

1386000 shares of convertible preferred stock had been issued on

per share
common

30-Jun

was

12500000

convertible was converted

his date.

acquire a factory building

on the open markert at
12/31/2015

and paid as scheduled.

anding)

Shares (outstanding) Restatement Fraction of year

1-Apr
1897560
2
1/ 4
1-Jul
2329740
2
1/ 4
1-Aug
4659480
1/12
1-Nov
4945080
1/ 4
1-Dec
4914280
1/ 6

4557257
604800
216090
5378147

n issued on

Weighted Shares
$948,780
$1,164,870
$388,290
$1,236,270
$819,047
4557257

Issued

3330000
interest paid

each

10 year
semiannually

8%

30-Jun and

1000 debenture can be convered into

1-Jan-16
333000 of debentures are converted into common stock
Market of the common stock is then
117
Accrued interest at will be paid on the next interest date

12/31/2015 Interest Expense

Premium on Bonds Payable
Cash
1/1/2016 Bonds Payable
Premium on Bonds Payable
Common Stock
Paid-In Capital in Excess - Common Stock
3/31/2016 Interest Expense
Premium on Bonds Payable
Interest Payable

127206
5994

333000
8525

6423
237

3/31/2016 Bonds Payable

Premium on Bonds Payable
Common Stock
Paid-In Capital in Excess- Common Stock

333000
8288

6/30/2016 Interest Expense

Premium on Bonds Payable
Interest Payable
Cash

101765
4795
6660

Convertible at

104

31-Dec
9 shares of

ed into common stock

104 par value common stock after

which is then selling at

paid on the next interest date

133200

311688
29837

6660

311688
29600

113220

114 and additional

333000

31-Dec-15

are converted on

31-Mar-16