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Intermediate Accounting 17th Edition James D. Stice, Earl K. Stice, Fred Skousen - Solutions

What is the two-class method?
What is meant by dilution of EPS?
What is an antidilutive security? Why are such securities generally excluded from the computation of EPS?
What is the treasury stock method of accounting for outstanding stock options, warrants, and rights in computing diluted EPS?
Convertible debt that is dilutive requires an adjustment to income. What is the nature of the adjustment?
What is the meaning of the if-converted method of computing EPS?
If stock options are actually exercised during the year, how is diluted EPS affected?
Why are all convertible securities and option santidilutive when a company is operating at a loss?
If a company has multiple potentially dilutive securities, how are the computations made to ensure obtaining the lowest EPS figure?
On January 1, the company had 100,000 common shares outstanding. On April 1, the company issued 30,000 additional shares. On August 1, the company reacquired 50,000 shares. What was the weighted-average number of shares outstanding for the year?
On January 1, the company had 150,000 common shares outstanding. During the year, the following events occurred:March 1: 2-for-1 stock splitJune 1: Issued 45,000 additional sharesSeptember 1: 20% stock dividendWhat was the weighted-average number of shares outstanding for the year?
On January 1, the company had 100,000 common shares outstanding. This same number of common shares was outstanding throughout the year. The company also had 30,000 shares of 5%, $100 par preferred stock outstanding throughout the year. The company did not declare any common or preferred dividends
On January 1, the company had 100,000 common shares outstanding. On April 1, the company issued 30,000 additional shares. On August 1, the company performed a 2-for-1 stock split. The company also had 10,000 shares of 8%, $50 par preferred stock outstanding throughout the year. The company declared
The company had the following shares of stock outstanding during the year. Data regarding dividend privileges and net income are also given.Common shares outstanding: 320,000 for the entire yearParticipating preferred shares outstanding: 100,000 shares for the entire yearNet income:
The company had 200,000 shares of common stock outstanding throughout the year. In addition, as of January 1, the company had issued stock options that allowed employees to purchase 50,000 shares of common stock. The option exercise price is $10 per share. The company has no other potentially
Refer to Practice 18–6. Assume that the options were issued on September 1 instead of being outstanding throughout the year. Compute diluted earnings per share, assuming that(1) The ending stock price for the year and for the September 1–December 31 period was $5 and (2) The ending stock price
The company had 100,000 shares of common stock outstanding throughout the year. In addition, as of January 1, the company had issued 10,000 convertible preferred shares (cumulative, 5%, $100 par). The company has no other potentially dilutive securities. Net income for the year was $200,000.
Refer to Practice 18–8. Assume that the convertible preferred stock was issued on February 1. Also assume that the issuance agreement stipulates that the preferred stockholders are entitled to their entire preferred dividend for the year even though the shares are issued on February 1. Compute
The company had 50,000 shares of common stock outstanding throughout the year. In addition, as of January 1, the company had issued 100 convertible bonds ($1,000 face value, 10%). The company has no other potentially dilutive securities. Net income for the year was $100,000. The income tax rate is
Refer to Practice 18–10. Assume that the convertible bonds were issued on October 1. Compute diluted earnings per share, assuming that(1) Each bond was convertible into 100 shares of common stock and(2) Each bond was convertible into 15 shares of common stock.
Net income for the company for the year was $300,000, and 100,000 shares of common stock were outstanding during the year. The income tax rate is 30%. For each of the following potentially dilutive securities, perform the shortcut antidilution test to determine whether the security is dilutive.
The company had 100,000 shares of common stock outstanding on January 1. In addition, as of January 1, the company had issued stock options that allowed employees to purchase 40,000 shares of common stock. The option exercise price is $10 per share. The options were exercised on April 1. The ending
The company had 200,000 shares of common stock outstanding on January 1. In addition, as of January 1, the company had issued 5,000 convertible preferred shares (cumulative, 5%, $100 par). These preferred shares were converted on September 1. Each preferred share was converted into five shares of
The company had 100,000 shares of common stock outstanding on January 1. In addition, as of January 1, the company had issued 500 convertible bonds ($1,000 face value, 10%). The company has no other potentially dilutive securities. The bonds were converted on August 1; 40 shares of common stock
The company reported a net loss of $300,000 for the year and 100,000 shares of common stock were outstanding during the year. The income tax rate is 30%. For each of the following potentially dilutive securities, compute (1) basic EPS and (2) diluted EPS. Assume that each of the securities was
The company reported net income of $300,000 for the year and 100,000 shares of common stock were outstanding during the year. The income tax rate is 40%. The company has the following potentially dilutive securities. Assume that each of the securities was issued on or before January 1. Compute(1)
The company reported net income of $430,000 for the year and 120,000 shares of common stock were outstanding during the year. The income tax rate is 30%. The company has the following potentially dilutive securities. Assume that each of the securities was issued on or before January 1. Compute(1)
The income statement for the company is as follows:Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,000,000Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Refer to Practice 18–17. Assume that the company issued 25,000 new shares of common stock on June 1 and that the company issued a 2-for-1 stock split on December 1. Compute(1) Basic EPS and(2) Diluted EPS. (Note: The shares in the option, convertible preferred, and convertible bond descriptions
Compute the weighted-average number of shares outstanding for Steadman Company, which has a simple capital structure, assuming that the following transactions in common stock occurred during the calendaryear.
Transactions involving the common stock account of Higrade Gas Company during the 2-year period 2011 to 2012 were as follows:2011Jan. 1 Had a balance of 200,000 shares of $10 par common stock.Apr. 1 Converted $2,500,000 of convertible bonds with 50 shares issued for each $1,000 bond.July 1 Declared
Assume that the following transactions affected owners’ equity for De Soto Inc. during 2011.Feb. 1 Sold 40,000 shares of common stock in the market.Apr. 1 Purchased 3,000 shares of common stock to be held as treasury stock. Paid cash dividends of $0.50 per share.May 1 Split common stock 2 for
At December 31, 2011, Marquis Corporation had 100,000 shares of common stock issued and outstanding, 60,000 of which had been issued and outstanding throughout the year and 40,000 of which had been issued on October 1, 2011. Income before income taxes for the year ended December 31, 2011, was
The income statement for Fignon Co. for the year ended December 31, 2011, reported the following.Income from continuing operations before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . $35,000Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Kingston Corporation has basic earnings per common share of $1.54 for the year ended December 31, 2011. For each of the following independent examples, decide whether the convertible security would be dilutive or antidilutive in computing diluted EPS. Consider each example individually. The tax
On January 1, 2011, Primavera Corporation had 55,000 shares of common stock outstanding that did not change during 2011. In 2010, Primavera granted options to certain executives to purchase 12,000 shares of its common stock at $6 each. The ending market price of common was $11.00 per share for
Barone Company has employee stock options outstanding to purchase 40,000 common shares at $14 per share. All options were outstanding during the entire year.The ending price of the company’s common stock for the year was $20. Compute the incremental shares that would be used in arriving at
On January 2, 2011, McGregor Co. issued at par $45,000 of 9% bonds convertible in total into 4,000 shares of McGregor’s common stock. No bonds were converted during 2011. Throughout 2011, McGregor had 10,000 shares of common stock outstanding.McGregor’s 2011 net income was $75,000. McGregor’s
Delgado Manufacturing Company reports long-term liabilities and stockholders’ equity balances at December 31, 2011, as follows:Convertible 5% bonds (par) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . $ 800,000Common stock, $25 par, 100,000 shares
During all of 2011, Cougar Inc. had outstanding 180,000 shares of common stock and 16,000 shares of $5 preferred stock. Each share of the preferred stock is convertible into five shares of common stock. For 2011, Cougar had a $175,000 loss from operations; no dividends were paid or declared.Compute
Atlas, Inc., has the following capital structure at January 1, 2011.OutstandingCommon stock, $10 par . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 800,000shares 11% stated interest rate convertible bonds issued at par;each $1,000 bond is convertible into
At December 31, 2011, the books of Yorke Corporation include the following balances:Long-term liabilities:Bonds payable, 8%, each $1,000 bond is convertible into 50 shares of common stock; bonds sold at par and were issuedNovember 3, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Information relating to the capital structure of Harry Porter Corporation at December 31,2010 and 2011, is as follows:OutstandingCommon stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 270,000 sharesConvertible preferred stock
Outdoor Recreation Products Inc. had 50,000 shares of common stock outstanding at the end of 2010. During 2011 and 2012, the following transactions took place.2011Mar. 31 Sold 10,000 shares at $24.Apr. 26 Paid cash dividend of $0.45 per share.July 31 Paid cash dividend of $0.20 per share and issued
The following condensed financial statements for Hudson Corporation were prepared by the accounting department.Hudson CorporationBalance SheetDecember 31, 2011Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . .
Great Northern Inc. reported the following comparative information in the Stockholders' Equity section of its 2012 balance sheet.*Par value after June 1, 2012, stock split.In addition, company records show that the following transactions involving stockholders' equity were recorded in 2011 and
The records of Eureka Gold Company reveal the following capital structure as of December 31, 2010.$9 preferred stock, $100 par, 5,000 shares issued and outstanding . . . . .. . . . . . . . . . . $ 500,000Additional paid-in capital on preferred stock . . . . . . . . . . . . . . . . . . . . . . . .
Kulkulcan Technology Co. provides the following data at December 31, 2011.Operating revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,460,000Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
As of January 1, 2011, Anvil Corporation had 25,000 shares of $10 par common stock outstanding. The company had issued stock options in 2009 to its management personnel, permitting them to acquire 4,000 shares of common stock at $12 per share.At the time of the issuance, common stock was selling
The following information relates to the December 31, 2010, balance sheet for Chiapucci Incorporated.6% convertible 10-year debentures issued at par . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,000,000Common stock, $12 par, 110,000 shares issued and outstanding . . . . . . . . . . .
Hillcrest Corporation's capital structure is as follows:The following additional information is available.(a) On September 1, 2012, Hillcrest sold 74,000 additional shares of common stock.(b) Net income for the year ended December 31, 2012, was $920,000.(c) During 2012, Hillcrest declared and paid
The Stockholders’ Equity section of Alta Company’s balance sheet as of December 31, 2011, contains the following:$2 cumulative preferred stock, $25 par, convertible,1,600,000 shares authorized, 1,400,000 shares issued,750,000 converted to common, 650,000 shares outstanding . . . . . . .. . . .
At December 31, 2011, Hemington Company had 320,000 shares of common stock outstanding. Hemington sold 80,000 shares on October 1, 2012. Net income for 2012 was $1,985,000; the income tax rate was 35%. In addition, Hemington had the following debt and equity securities on its books at December 31,
Data for Schrute Powder Company at the end of 2012 follow. All bonds are convertible as indicated and were issued at their face amounts.Instructions:1. Compute basic and diluted EPS for 2012, assuming that no additional shares of common stock were issued during the year.2. Compute basic and diluted
Kishkumen Company had the following capital structure at December 31, 2011 and 2012:The following additional information is available.(a) The conversion terms of the preferred stock and bonds at January 1, 2012, were as follows: Preferred stock, five shares of common for each share of preferred;
Fredrica Brown has $200,000 that she plans to invest in growth stocks. She has narrowed her choices to two companies in the same industry, White Inc. and Adam Inc.Each company has a documented history of growth and an established, strong position within the industry. Last year, each company
On January 1, 2009, Farnsworth Company had 1,000,000 shares of common stock and 100,000 shares of $8 cumulative preferred stock issued and outstanding. A principal goal of Farnsworth's management is to maintain or increase EPS.On January 1, 2010, Farnsworth Company retired 50,000 shares of the
Big Horn Construction Company has gradually grown in size since its inception in 1919. The third generation of Jensens who now manage the enterprise are considering selling a large block of stock to raise capital for new equipment purchases and to help finance several big projects. The Jensens are
You have just finished presenting a summary of this year’s financial results to the board of directors. Included in your presentation was an income statement including both basic and diluted EPS figures. One of the board members comments that he understands basic EPS but has no clue as to what
McDonald€™s Corporation is in the business of€”wait, we all know what McDonald€™s does. The company€™s earnings per share information and an accompanying note relating to its computation of EPS follow.Answer the following questions.1. Compute the average
Review the information relating to EPS found in The Walt Disney Company’s 2007 income statement and notes to the financial statements on the Internet.Answer the following questions.1. Using the information provided on the face of the income statement relating to net income and average number of
Cadbury Schweppes manufactures beverages and confectionary candies. Because the company is based in the United Kingdom, it is not required to comply with U.S. GAAP. However, the standards relating to EPS under which Cadbury Schweppes prepared its 2007 annual report are similar to the requirements
FASB Statement No. 128 represents the first time in which the FASB has worked directly with the IASC (predecessor of the IASB) in issuing a major accounting standard. The FASB is now working with the IASB to increase the international harmonization of accounting standards.In two pages or less,
To help you become familiar with the accounting standards, this case is designed to take you to the FASB’s Web site and have you access various publications. Access the FASB’s Web site at www.fasb.org. Click on “Pronouncements & EITF Abstracts.”In this chapter, we discussed earnings per
After computing the current period’s basic and diluted EPS figures, you notice that while basic EPS continues its upward trend, diluted EPS has dropped slightly.In discussions with your manager regarding reasons for the decline, you identify numerous potentially dilutive securities that were
On the balance sheets of many companies, the largest classification of assets in amount is noncurrent operating assets. Name the items, other than the amount paid to the former owner or contractor that may be properly included as part of the acquisition cost of the following property items: (a)
What acquisition costs are included in (a) Copyrights, (b) Franchises, and (c) Trademarks?
What procedure should be followed to allocate the cost of a basket purchase of assets among specific accounts?
What special accounting problems are introduced when a company purchases equipment on a deferred payment contract rather than with cash?
(a) Why is the “list price” of an asset often not representative of its fair market value?(b) Under these conditions, how should a fair value be determined?
Gaylen Corp. decides to construct a building for itself and plans to use existing plant facilities to assist with such construction. (a) What costs will enter into the cost of construction?(b) What two positions can the company take with respect to general overhead allocation during the period of
What characteristics must a construction project have before interest can be capitalized as part of the project cost?
What amount of interest is capitalized under IAS 23?
Parkhurst Corporation acquires land and buildings valued at $250,000 as a gift from a local philanthropist. The president of the company maintains that because there was no cost for the acquisition, neither the cost of the facilities nor depreciation needs to be recognized for financial statement
What type of asset value increases are recognized under IAS 41?
What is an asset retirement obligation? What is the proper accounting for an asset retirement obligation?
Why do some companies expense asset expenditures that are less than an established monetary amount?
Indicate the effects of the following errors on the balance sheet and the income statement in the current year and succeeding years.(a) The cost of a depreciable asset is incorrectly recorded as an expense.(b) An expense expenditure is incorrectly recorded as an addition to the cost of a
Which of the following items would be recorded as expenses and which would be recorded as assets?(a) Cost of installing machinery(b) Cost of unsuccessful litigation to protect patent(c) Extensive repairs as a result of a fire(d) Cost of grading land(e) Insurance on machinery in transit(f) Interest
What happens to the remaining net book value of a component that is replaced?
(a) What type of activities are considered to be research and development activities? (b) Under what conditions, if any, are research and development costs capitalized?
Distinguish between the full cost and successful efforts methods of recording exploratory costs for oil and gas properties.
In general, how is the cost of internally generated intangibles accounted for?
What are the five general categories of intangible assets?
What two approaches are used in estimating fair values using present value computations? Briefly explain the difference between the two approaches.
(a) Under what conditions may goodwill be reported as an asset? (b) Roper Company engages in a widespread advertising campaign on behalf of new products, charging above normal expenditures to goodwill. Do you approve of this practice? Why or why not?
How is acquired in-process research and development accounted for under U.S. GAAP?
What argument is given for reporting noncurrent operating assets at their historical costs instead of at current values?
Under the provisions of IAS 16, what is the credit entry when noncurrent operating assets are written up to reflect an increase in market value?
What basic rights are held by each common stockholder?
Describe the fair value option that is available under IAS 40 to companies that own investment property.
How is the fixed asset turnover ratio calculated, and what does the resulting ratio measure?
Briefly describe the dangers to financial statement users inherent in the use of the fixed asset turnover ratio.
The following costs were incurred in the most recent year: (a) Paid $20,000 to purchase a piece of equipment. In addition, paid $1,000 to have the equipment shipped to and installed in its final location. Spent $1,750 to have the equipment tested before beginning its production use. Paid $2,000 for
The company paid $750,000 to buy a collection of assets. The assets had the following appraised values:Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $250,000Building . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The company purchased a piece of equipment. Terms of the purchase were as follows: $10,000 in cash immediately, followed by note payments of $20,000 at the end of each year for the next eight years. The market rate of interest is 9%. Make the journal entries necessary to record(1) The initial
The company exchanged a piece of land for a new piece of equipment. The equipment has a list price of $100,000, and the land has a historical cost of $35,000. The land has a current market value of $93,000. Make the journal entry necessary to record the exchange.
The company constructed its own building. The cost of materials was $400,000. Labor cost incurred on the construction project was $600,000. Total overhead cost for the company for the year was $8,000,000; total labor cost (including the cost of construction) was $4,000,000. Interest incurred to
The company had the following loans outstanding for the entire year:The company began the self-construction of a building on January 1. The following expenditures were made during the year:January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $100,000May 1
Refer to Practice 10-6. Make the journal entry necessary to record total interest paid for the year. Assume that all of the interest was paid in cash on December 31.

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