1553571317_q0.docx

Q.1 A&B A.Chang Corporation issued $6,000,000 of 9%, ten-year convertible bonds on Jan 1, 2017 at 102. The bonds were dated Jan 1, 2017 with interest payable June 30 and December 31. Bond discount is amortized semiannually on a straight-line basis. Each $1,000 debenture is convertible into 40 shares of Chang $20 par common stock. On Jan 1, 2018, $1,200,000 of these bonds were converted. What should be the amount of the debit to Interest Expense on June 30, 2017? a. $306,000 b. $264,000 c. $270,000 d. $276,000 B.Refer to the information above. Which of the following is the correct journal entry to record the conversion of the Chang bonds on Jan. 1, 2018? a. Bonds Payable $1,200,000 Premium on B/P 108,000 Common Stock $960,000 PIC in excess of par – C/S 348,000 b. Bonds Payable $1,200,000 Premium on B/P 21,600 Common Stock PIC in excess of par – C/S

$960,000 261,600

c. Bonds Payable $1,200,000 Common Stock PIC in excess of par – C/S

$960,000 240,000

d. Bonds Payable $1,200,000 Premium on B/P 108,000 Common Stock $480,000 PIC in excess of par – C/S 828,000 Q.2 Computing EPS: Convertible Debt Shaffer Corporation issued $100,000 10% convertible bonds in 2019 at face value. Each $1,000 bond is convertible into 100 shares of common stock. Shaffer’s net income for 2020 is $1,824,000; the tax rate is 25%. No bonds were converted during the year and average common shares outstanding are 1,010,000. a. Compute basic earnings per share for 2020. b. Compute diluted earnings per share for 2020. c. How do the answers to parts a. and b. change if the bonds were issued on July 1, 2020? Q.3 Computing EP: Stock Options Rand, Inc. had a net income of $80,000. During the year, 200,000 shares were outstanding on average and Rand’s common stock sold at an average market price of $50. In addition, Rand had 20,000 stock options outstanding to purchase a total of 20,000 common shares at $25 for each option exercised. a.

Compute basic earnings per share.

b.

Compute diluted earnings per share.