On June 1, 2021, Gustav Corp. and Gabby Limited merged to form Carla Vista Inc. A total of 680,000 shares were issued to complete the merger. The new corporation uses the calendar year as its fiscal year. On April 1, 2023, the company issued an additional 340,000 shares for cash. All 1.02 million shares were outstanding on December 31, 2023. Carla Vista also issued $510,000 of 20-year, 10% convertible bonds at par on July 1, 2023. Each $1,000 bond converts to 45 common shares at the annual interest date. None of the bonds have been converted to date. If the bonds had been issued without the conversion feature, the annual interest rate would have been 11%. Carla Vista is preparing its annual financial statements for the fiscal year ended December 31, 2023. The financial statements will show earnings per share figures based on a reported after-tax net income of $1,600,000. (The tax rate is 30%.)
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- On July 2, 2018, McGraw Corporation issued 500,000 of convertible bonds. Each 1,000 bond could be converted into 20 shares of the companys 5 par value stock. On July 3, 2020, when the bonds had an unamortized discount of 7,400 and the market value of the McGraw shares was 52 per share, all the bonds were converted into common stock. Required: 1. Prepare the journal entry to record the conversion of the bonds under (a) the book value method and (b) the market value method. 2. Compute the companys debt-to-equity ratio (total liabilities divided by total shareholders equity, as described in Chapter 6) under each alternative. Assume the companys other liabilities are 2 million and shareholders equity before the conversion is 3 million. 3. Assume the company uses IFRS and issued the bonds for 487,500 on July 2, 2018. On this date, it determined that the fair value of each bond was 930 and the fair value of the conversion option was 45 per bond. Prepare the journal entry to record the issuance of the bonds.Frost Company has accumulated the following information relevant to its 2019 earningsper share. 1. Net income for 2019: 150,500. 2. Bonds payable: On January 1, 2019, the company had issued 10%, 200,000 bonds at 110. The premium is being amortized in the amount of 1,000 per year. Each 1,000 bond is currently convertible into 22 shares of common stock. To date, no bonds have been converted. 3. Bonds payable: On December 31, 2017, the company had issued 540,000 of 5.8% bonds at par. Each 1,000 bond is currently convertible into 11.6 shares of common stock. To date, no bonds have been converted. 4. Preferred stock: On July 3, 2018, the company had issued 3,800 shares of 7.5%, 100 par, preferred stock at 108 per share. Each share of preferred stock is currently convertible into 2.45 shares of common stock. To date, no preferred stock has been converted and no additional shares of preferred stock have been issued. The current dividends have been paid. 5. Common stock: At the beginning of 2019, 25,000 shares were outstanding. On August 3, 7,000 additional shares were issued. During September, a 20% stock dividend was declared and issued. On November 30, 2,000 shares were reacquired as treasury stock. 6. Compensatory share options: Options to acquire common stock at a price of 33 per share were outstanding during all of 2019. Currently, 4,000 shares may be acquired. To date, no options have been exercised. The unrecognized compens Frost Company has accumulated the following information relevant to its 2019 earnings ns is 5 per share. 7. Miscellaneous: Stock market prices on common stock averaged 41 per share during 2019, and the 2019 ending stock market price was 40 per share. The corporate income tax rate is 30%. Required: 1. Compute the basic earnings per share. Show supporting calculations. 2. Compute the diluted earnings per share. Show supporting calculations. 3. Indicate which earnings per share figure(s) Frost would report on its 2019 income statement.Waseca Company had 5 convertible securities outstanding during all of 2019. It paid the appropriate interest (and amortized any related premium or discount using the straight line method) and dividends on each security during 2019. Each of the convertible securities is described in the following table: Additional data: Net income for 2019 totaled 119,460. The weighted average number of common shares outstanding during 2019 was 40,000 shares. No share options or warrants arc outstanding. The effective corporate income tax rate is 30%. Required: 1. Prepare a schedule that lists the impact of the assumed conversion of each convertible security on diluted earnings per share. 2. Prepare a ranking of the order in which each of the convertible securities should be included in diluted earnings per share. 3. Compute basic earnings per share. 4. Compute diluted earnings per share. 5. Indicate the amount(s) of the earnings per share that Waseca would report on its 2019 income statement.
- On June 1, 2018, Andre Company and Agassi Company merged to form Lancaster Inc. A total of 800,000 shares were issued to complete the merger. The new corporation reports on a calendar-year basis. On April 1, 2020, the company issued an additional 400,000 shares of stock for cash. All 1,200,000 shares were outstanding on December 31, 2020. Lancaster Inc. also issued $600,000 of 20-year, 8% convertible bonds at par on July 1, 2020. Each $1,000 bond converts to 40 shares of common at any interest date. None of the bonds have been converted to date. Lancaster Inc. is preparing its annual report for the fiscal year ending December 31, 2020. The annual report will show earnings per share figures based upon a reported after-tax net income of $1,540,000. (The tax rate is 20%.) Instructions Determine the following for 2020. a. The number of shares to be used for calculating: 1. Basic earnings per share. 2. Diluted earnings per share. b. The earnings figures to be used for calculating: 1.…On June 1, 2018, Sunland Company and Coronado Company merged to form Whispering Inc. A total of 870,000 shares were issued to complete the merger. The new corporation reports on a calendar-year basis.On April 1, 2020, the company issued an additional 577,000 shares of stock for cash. All 1,447,000 shares were outstanding on December 31, 2020.Whispering Inc. also issued $600,000 of 20-year, 9% convertible bonds at par on July 1, 2020. Each $1,000 bond converts to 40 shares of common at any interest date. None of the bonds have been converted to date.Whispering Inc. is preparing its annual report for the fiscal year ending December 31, 2020. The annual report will show earnings per share figures based upon a reported after-tax net income of $1,564,000. (The tax rate is 20%.)Determine the following for 2020.(a) The number of shares to be used for calculating: (Round answers to 0 decimal places, e.g. $2,500.) (1) Basic earnings per share enter a number of shares rounded to 0…On June 1, 2018, Indigo Company and Sweet Company merged to form Pharoah Inc. A total of 870,000 shares were issued to complete the merger. The new corporation reports on a calendar-year basis.On April 1, 2020, the company issued an additional 543,000 shares of stock for cash. All 1,413,000 shares were outstanding on December 31, 2020.Pharoah Inc. also issued $600,000 of 20-year, 8% convertible bonds at par on July 1, 2020. Each $1,000 bond converts to 38 shares of common at any interest date. None of the bonds have been converted to date.Pharoah Inc. is preparing its annual report for the fiscal year ending December 31, 2020. The annual report will show earnings per share figures based upon a reported after-tax net income of $1,613,000. (The tax rate is 20%.)Determine the following for 2020. a) - Basic Earnings per share - Diluted Earnings per share b) the earnings used to calculate: - Basic Earnings per share - Diluted Earnings per share
- On June 1, 2023, Concord Company and Marigold Company merged to form Swifty Inc. A total 870,000 shares were issued to complete the merger. The new corporation reports on a calendar-year basis. On April 1, 2025, the company issued an additional 577,000 shares of stock for cash. All 1,447,000 shares were outstanding on December 31, 2025. Swifty Inc. also issued $600,000 of 20-year, 9% convertible bonds at par on July 1, 2025. Each $1,000 band converts to 40 shares of common at any interest date. None of the bonds have been converted to date. Swifty Inc. is preparing its annual report for the fiscal year ending December 31, 2025. The annual report will show earnings per share figures based upon a reported after-tax net income of $1,564,000. (The tax rate is 20%) Determine the following for 2025. a. The number of shares to be used for calculating: (Round answers to O decimal places, eg. 2,500) 1. 2 1. Basic earnings per share 2 Diluted earnings per share b. The earnings figures to be used…On June 1, 2018, Coronado Company and Whispering Company merged to form Metlock Inc. A total of 877,000 shares were issued to complete the merger. The new corporation reports on a calendar-year basis. On April 1, 2020, the company issued an additional 652,000 shares of stock for cash. All 1,529,000 shares were outstanding on December 31, 2020. Metlock Inc. also issued $600,000 of 20-year, 8% convertible bonds at par on July 1, 2020. Each $1.000 bond converts to 44 shares of common at any interest date. None of the bonds have been converted to date. Metlock Inc. is preparing its annual report for the fiscal year ending December 31, 2020. The annual report will show earnings per share figures based upon a reported after-tax net income of $1,444,000. (The tax rate is 20%.) Determine the following for 2020. (a) The number of shares to be used for calculating: (Round answers to 0 decimal places, eg. $2,500.) (1) Basic earnings per share 1366000 shares (2) Diluted earnings per share 1379200…On June 1, 2018, Vaughn Company and Bramble Company merged to form Sunland Inc. A total of 808,000 shares were issued to complete the merger. The new corporation reports on a calendar-year basis.On April 1, 2020, the company issued an additional 568,000 shares of stock for cash. All 1,376,000 shares were outstanding on December 31, 2020.Sunland Inc. also issued $600,000 of 20-year, 7% convertible bonds at par on July 1, 2020. Each $1,000 bond converts to 44 shares of common at any interest date. None of the bonds have been converted to date.Sunland Inc. is preparing its annual report for the fiscal year ending December 31, 2020. The annual report will show earnings per share figures based upon a reported after-tax net income of $1,547,000. (The tax rate is 20%.)Determine the following for 2020.(a) The number of shares to be used for calculating: (Round answers to 0 decimal places, e.g. $2,500.) (1) Basic earnings per share enter a number of shares rounded to 0 decimal places…
- On June 1, 2018, Bramble Company and Sunland Company merged to form Coronado Inc. A total of 761,000 shares were issued to complete the merger. The new corporation reports on a calendar-year basis.On April 1, 2020, the company issued an additional 652,000 shares of stock for cash. All 1,413,000 shares were outstanding on December 31, 2020.Coronado Inc. also issued $600,000 of 20-year, 7% convertible bonds at par on July 1, 2020. Each $1,000 bond converts to 40 shares of common at any interest date. None of the bonds have been converted to date.Coronado Inc. is preparing its annual report for the fiscal year ending December 31, 2020. The annual report will show earnings per share figures based upon a reported after-tax net income of $1,390,000. (The tax rate is 20%.)Determine the following for 2020.(a) The number of shares to be used for calculating: (1) Basic earnings per share (2) Diluted earnings per share (b) The earnings figures to be used for calculating:…On June 1, 2018, Larkspur Company and Cullumber Company merged to form Riverbed Inc. A total of 870,000 shares were issued to complete the merger. The new corporation reports on a calendar-year basis.On April 1, 2020, the company issued an additional 543,000 shares of stock for cash. All 1,413,000 shares were outstanding on December 31, 2020.Riverbed Inc. also issued $600,000 of 20-year, 8% convertible bonds at par on July 1, 2020. Each $1,000 bond converts to 38 shares of common at any interest date. None of the bonds have been converted to date.Riverbed Inc. is preparing its annual report for the fiscal year ending December 31, 2020. The annual report will show earnings per share figures based upon a reported after-tax net income of $1,613,000. (The tax rate is 20%.)Determine the following for 2020.(a) The number of shares to be used for calculating: (Round answers to 0 decimal places, e.g. $2,500.) (1) Basic earnings per share enter a number of shares rounded to 0 decimal…On June 1, 2018, Cullumber Company and Riverbed Company merged to form Marin Inc. A total of 877,000 shares were issued to complete the merger. The new corporation reports on a calendar-year basis.On April 1, 2020, the company issued an additional 652,000 shares of stock for cash. All 1,529,000 shares were outstanding on December 31, 2020.Marin Inc. also issued $600,000 of 20-year, 8% convertible bonds at par on July 1, 2020. Each $1,000 bond converts to 44 shares of common at any interest date. None of the bonds have been converted to date.Marin Inc. is preparing its annual report for the fiscal year ending December 31, 2020. The annual report will show earnings per share figures based upon a reported after-tax net income of $1,444,000. (The tax rate is 20%.)Determine the following for 2020.(a) The number of shares to be used for calculating: (Round answers to 0 decimal places, e.g. $2,500.) (1) Basic earnings per share enter a number of shares rounded to 0 decimal places…