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intermediate accounting 11th

Intermediate Accounting IFRS International Adaptation 5th Edition Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield - Solutions

CA15.1 (LO 1, 2, 3, 5) (Dilutive Securities, EPS) Two students are discussing the current chapter on dilutive securities and earnings per share. Here are some of the points raised in their discussion.1. Is there a difference between issuing convertible debt versus issuing debt with share warrants?
*P15.8 (LO 4, 7) (EPS with Share Dividend and Discontinued Operations) Agassi AG is preparing the comparative financial statements to be included in the annual report to shareholders. Agassi employs a fiscal year ending May 31.Income before income tax for Agassi was €1,400,000 and €660,000,
*P15.7 (LO 4, 5, 7) (Computation of Basic and Diluted EPS) The information below pertains to Barkley plc for 2026.Net income for the year £1,200,000 8% convertible bonds issued at par (£1,000 per bond); each bond is convertible into 30 shares of ordinary shares; the liability component of the
P15.6 (LO 5) Groupwork (Computation of Basic and Diluted EPS) Charles Austin of the controller’s office of Thompson Corporation was given the assignment of determining the basic and diluted earnings per share values for the year ending December 31, 2026. Austin has compiled the information listed
P15.5 (LO 4) (Basic EPS: Two-Year Presentation) Meng Group is preparing the comparative financial statements for the annual report to its shareholders for fiscal years ended May 31, 2025, and May 31, 2026 (yen in thousands). The income from continuing operations for each year was ¥1,800,000 and
*P15.4 (LO 4, 5, 7) Groupwork (EPS with Complex Capital Structure) Amy Dyken, controller at Fitzgerald Pharmaceutical Industries, a public company, is currently preparing the calculation for basic and diluted earnings per share and the related disclosure for Fitzgerald’s financial statements.
P15.3 (LO 3) (Share-Based Compensation) Assume that Sarazan SA has a share-option plan for top management. Each share option represents the right to purchase a R$1 par value ordinary share in the future at a price equal to the fair value of the shares at the date of the grant. Sarazan has 5,000
P15.2 (LO 3) (Share-Option Plan) Berg Company adopted a share-option plan on November 30, 2024, that provided that 70,000 shares of $5 par value ordinary shares be designated as available for the granting of options to officers of the company at a price of $9 a share. The market price was $12 a
P15.1 (LO 1, 2, 3) Groupwork (Entries for Various Dilutive Securities) The equity section of Martino AG at the beginning of the current year appears below.Share capital—ordinary,€10 par value, authorized 1,000,000 shares, 300,000 shares issued and outstanding €3,000,000 Share
*E15.31 (LO 6) (Share-Appreciation Rights) Dominquez SA establishes a share-appreciation rights program that entitles its new president Dan Scott to receive cash for the difference between the market price of the shares and a pre-established price of R$30 (also market price) on December 31, 2023,
*E15.30 (LO 6) (Share-Appreciation Rights) On December 31, 2022, Flessel plc issues 120,000 share-appreciation rights to its officers entitling them to receive cash for the difference between the market price of its shares and a pre-established price of £10. The fair value of the SARs is estimated
E15.29 (LO 5) (EPS with Warrants) Werth AG earned €260,000 during a period when it had an average of 100,000 ordinary shares outstanding. The ordinary shares sold at an average market price of €15 per share during the period. Also outstanding were 30,000 warrants that could be exercised to
E15.28 (LO 5) (EPS with Contingent Issuance Agreement) Brooks Inc. recently purchased Donovan Corp., a large midwestern home painting company. One of the terms of the merger was that if Donovan’s income for 2026 was $110,000 or more, 10,000 additional shares would be issued to Donovan’s
E15.27 (LO 5) (EPS with Options, Various Situations) Zambrano plc net income for 2025 is£40,000. The only potentially dilutive securities outstanding were 1,000 options issued during 2024, each exercisable for one share at £8. None has been exercised, and 10,000 ordinary shares were outstanding
E15.26 (LO 1, 5) (EPS with Convertible Bonds and Preference Shares) On January 1, 2025, Lund SA issued 10-year, €3,000,000 face value, 6% bonds, at par. Each €1,000 bond is convertible into 15 ordinary shares of Lund. Lund’s net income in 2026 was €240,000, and its tax rate was 40%.
E15.25 (LO 1, 5) (EPS with Convertible Bonds and Preference Shares) The Ottey Corporation issued 10-year, $4,000,000 par, 7% callable convertible subordinated debentures on January 2, 2025. The bonds have a par value of $1,000, with interest payable annually. The interest expense recorded on the
E15.24 (LO 5) (EPS with Convertible Bonds) On June 1, 2024, Bluhm Company and Amanar Company merged to form Davenport SA. A total of 800,000 shares were issued to complete the merger.The new company reports on a calendar-year basis.On April 1, 2026, the company issued an additional 600,000 shares
E15.23 (LO 5) (EPS with Convertible Bonds, Various Situations) In 2025, Buraka Enterprises issued, at par, 75 1,000, 8% bonds, each convertible into 100 ordinary shares. The liability component of convertible bonds was 950 per bond, based on a market rate of interest of 10%. Buraka had revenues of
E15.22 (LO 4) (EPS: Simple Capital Structure) At January 1, 2025, Cameron Company’s outstanding shares included the following.280,000 shares of R$50 par value, 7% cumulative preference shares 800,000 shares of R$1 par value ordinary shares Net income for 2025 was R$2,830,000. No cash dividends
E15.21 (LO 4) (EPS: Simple Capital Structure) On January 1, 2025, Bailey Industries had shares outstanding as follows.6% cumulative preference shares, €100 par value, issued and outstanding 10,000 shares €1,000,000 Ordinary shares €10 par value, issued and outstanding 200,000 shares 2,000,000
E15.20 (LO 4) (EPS: Simple Capital Structure) A portion of the statement of income and retained earnings of Pierson Inc. for the current year follows.Income from continuing operations $15,000,000 Loss on discontinued operations, net of applicable income tax (Note 1) 1,340,000 Net income 13,660,000
E15.19 (LO 4) (EPS: Simple Capital Structure) Huang Ltd. presented the following data (yen in thousands).Net income ¥2,200,000 Preference shares: 50,000 shares outstanding,¥100 par, 8% cumulative, not convertible 5,000,000 Ordinary shares: Shares outstanding 1/1 600,000 Issued for cash, 5/1
E15.18 (LO 4) (EPS: Simple Capital Structure) Ott Company had 210,000 ordinary shares outstanding on December 31, 2025. During the year 2026, the company issued 8,000 shares on May 1 and retired 14,000 shares on October 31. For the year 2026, Ott Company reported net income of £229,690 after a
E15.17 (LO 4) (EPS: Simple Capital Structure) On January 1, 2025, Chang Ltd. had 480,000 ordinary shares outstanding. During 2025, it had the following transactions that affected the ordinary share account.February 1 Issued 120,000 shares March 1 Issued a 20% share dividend May 1 Acquired 100,000
E15.16 (LO 4) (Weighted-Average ordinary Shares) Portillo SA uses a calendar year for financial reporting. The company is authorized to issue 9,000,000 R$10 par ordinary shares. At no time has Portillo issued any potentially dilutive securities. Listed below is a summary of Portillo’s ordinary
E15.15 (LO 3) (Accounting for Restricted Shares) Lopez SpA issues 10,000 restricted shares to its CFO, Juan Carlos, on January 1, 2025. The shares have a fair value of €500,000 on this date. The service period related to the restricted shares is 5 years. Vesting occurs if Carlos stays with the
E15.14 (LO 3) (Accounting for Restricted Shares) Derrick plc issues 4,000 restricted shares to its CFO, Dane Yaping, on January 1, 2025. The shares have a fair value of £120,000 on this date. The service period related to these restricted shares is 4 years. Vesting occurs if Yaping stays with the
E15.13 (LO 3) (Issuance, Exercise, and Expiration of Share Options) On January 1, 2024, Tsang Ltd. granted 10,000 options to key executives. Each option allows the executive to purchase one share of Tsang’s HK$5 par value ordinary shares at a price of HK$20 per share. The options were exercisable
E15.13 (LO 3) (Issuance, Exercise, and Expiration of Share Options) On January 1, 2024, Tsang Ltd. granted 10,000 options to key executives. Each option allows the executive to purchase one share of Tsang’s HK$5 par value ordinary shares at a price of HK$20 per share. The options were exercisable
E15.12 (LO 3) (Issuance, Exercise, and Forfeiture of Share Options) On January 1, 2025, Magilla SA granted share options to officers and key employees for the purchase of 20,000 of the company’s €10 par ordinary shares at €25 per share. The options were exercisable by grantees still in the
E15.11 (LO 3) (Issuance and Exercise of Share Options) On November 1, 2024, Olympic plc adopted a share-option plan that granted options to key executives to purchase 40,000 shares of the company’s £10 par value ordinary shares. The options were granted on January 2, 2025, and were vested 2
E15.10 (LO 2) (Issuance of Bonds with Share Warrants) On May 1, 2025, Barkley SA issued 3,000 €1,000 bonds at 102. Each bond was issued with one detachable share warrant. The fair value of the bonds on May 1, 2025, was €2,940,000.Instructionsa. Prepare the entry to record the issuance of the
E15.9 (LO 2) (Issuance of Bonds with Share Warrants) On September 1, 2025, Tokachi Group sold at 104 (plus accrued interest) 30,000 of its 8%, 10-year, ¥10,000 face value, non-convertible bonds with detachable share warrants. Each bond carried two detachable warrants. Each warrant was for one
E15.8 (LO 2) (Issuance of Bonds with Share Warrants) Sun Ltd. has decided to raise additional capital by issuing HK$175,000 face value of bonds with a coupon rate of 10%. In discussions with investment bankers, it was determined that to help the sale of the bonds, share warrants should be issued at
E15.7 (LO 1, 2) (Issuance and Conversion of Bonds) For each of the unrelated transactions described below, present the entry or entries required to record each transaction.1. Coyle SA issued €10,000,000 par value 10% convertible bonds at 99. If the bonds had not been convertible, the company’s
E15.6 (LO 1) (Conversion of Bonds) Gabel Company has bonds payable outstanding with a carrying value of $406,000. When issued, Gabel recorded $3,500 of conversion equity. Each of the 400 $1,000 bonds is convertible into 20 ordinary shares with par value of $50 per share. All bonds are converted
E15.5 (LO 1) (Conversion of Bonds) Schuss SA issued €3,000,000 of 10%, 10-year convertible bonds on April 1, 2025, at 98. The bonds were dated April 1, 2025, with interest payable April 1 and October 1. Bond discount is amortized semiannually using the effective-interest method. The net present
E15.4 (LO 1) (Issuance, Conversion, Repurchase of Convertible Bonds) On January 1, 2025, Lin plc issued a convertible bond with a par value of £50,000 in the market for £60,000. The bonds are convertible into 6,000 ordinary shares of £1 per share par value. The bond has a 5-year life and has a
E15.3 (LO 1) (Issuance and Repurchase of Convertible Bonds) On January 1, 2025, Cai Ltd.issued a 10% convertible bond at par, with a face value of ¥100,000, maturing on January 1, 2035 (amounts in thousands). The bond is convertible into ordinary shares of Cai at a conversion price of ¥2,500 per
E15.2 (LO 1) (Issuance and Repurchase of Convertible Bonds) Assume the same information in E15.1, except that Angela AG converts its convertible bonds on January 1, 2026.Instructionsa. Compute the carrying value of the bond payable on January 1, 2026.b. Prepare the journal entry to record the
E15.1 (LO 1) (Issuance and Repurchase of Convertible Bonds) Angela AG issues 2,000 convertible bonds at January 1, 2025. The bonds have a 3-year life and are issued at par with a face value of €1,000 per bond, giving total proceeds of €2,000,000. Interest is payable annually at 6%. Each bond is
*BE15.16 (LO 6) Ferraro, Inc. established a share-appreciation rights (SARs) program on January 1, 2025, which entitles executives to receive cash at the date of exercise for the difference between the market price of the shares and the pre-established price of $20 on 5,000 SARs. The required
BE15.15 (LO 4) The 2025 income statement of Wasmeier SE showed net income of €480,000 and a loss from discontinued operations of €120,000. Wasmeier had 100,000 shares of ordinary shares outstanding all year. Prepare Wasmeier’s income statement presentation of earnings per share.
BE15.14 (LO 5) Bedard Ltd. reported net income of 300,000 in 2025 and had 200,000 ordinary shares outstanding throughout the year. Also outstanding all year were 45,000 options to purchase ordinary shares at 10 per share. The average market price of the shares during the year was 15. Compute
BE15.13 (LO 5) DiCenta AG reported net income of €270,000 in 2025 and had 50,000 ordinary shares outstanding throughout the year. Also outstanding all year were 5,000 shares of cumulative preference shares, each convertible into 2 ordinary shares. The preference shares pay an annual dividend of
BE15.12 (LO 5) Rockland SA reported net income of R$300,000 in 2025 and had 100,000 ordinary shares outstanding throughout the year. Also outstanding all year was R$800,000 of 10% bonds, which are convertible into 16,000 ordinary shares. The interest expense on the liability component of the
BE15.11 (LO 4) Tomba Group had 300,000 ordinary shares outstanding on January 1, 2025. On May 1, Tomba issued 30,000 ordinary shares. (a) Compute the weighted-average ordinary shares outstanding if the 30,000 shares were issued for cash. (b) Compute the weighted-average ordinary shares outstanding
BE15.10 (LO 4) Douglas Corporation had 120,000 ordinary shares outstanding on January 1, 2025. On May 1, 2025, Douglas issued 60,000 ordinary shares. On July 1, Douglas purchased 10,000 treasury shares, which were reissued on October 1. Compute Douglas’s weighted-average ordinary shares
BE15.9 (LO 4) Kalin AG had 2025 net income of €1,000,000. During 2025, Kalin paid a dividend of€2 per share on 100,000 preference shares. During 2025, Kalin had outstanding 250,000 ordinary shares.Compute Kalin’s 2025 earnings per share.
BE15.8 (LO 3) On January 1, 2025 (the date of grant), Lutz Corporation issues 2,000 restricted shares to its executives. The fair value of these shares is $75,000, and their par value is $10,000. The shares are forfeited if the executives do not complete 3 years of employment with the company.
BE15.7 (LO 3) Refer to the data for Barwood Ltd. in BE15.6. Repeat the requirements, assuming that instead of options, Barwood granted 2,000 restricted shares.
BE15.6 (LO 3) On January 1, 2025, Barwood Ltd. granted 5,000 options to executives. Each option entitles the holder to purchase one share of Barwood’s £5 par value ordinary shares at £50 per share at any time during the next 5 years. The market price of the shares is £65 per share on the date
BE15.5 (LO 2) Parsons SpA issued 3,000 €1,000 bonds at 98. Each bond was issued with one detachable share warrant. At issuance, the net present value of the bonds without the warrants was €2,910,000.Prepare the journal entry to record the issuance of the bonds and the share warrants.
BE15.4 (LO 2) Eisler Corporation issued 2,000 $1,000 bonds at 101. Each bond was issued with one detachable share warrant. At issuance, the net present value of the bonds without the warrants was $1,970,000. Prepare the journal entry to record the issuance of the bonds and the share warrants.
BE15.3 (LO 1) Pechstein Corporation issued 2,000 shares of $10 par value ordinary shares upon conversion of 1,000 shares of $50 par value preference shares. The preference shares were originally issued at $60 per share. The ordinary shares are trading at $26 per share at the time of conversion.
BE15.2 (LO 1) Petrenko SA has outstanding 2,000 €1,000 bonds, each convertible into 50 shares of€10 par value ordinary shares. The bonds are converted on December 31, 2025. The bonds payable have a carrying value of €1,950,000, and there is conversion equity of €20,000. Record the
BE15.1 (LO 1) Archer plc issued £4,000,000 par value, 7% convertible bonds at 99 for cash. The net present value of the debt without the conversion feature is £3,800,000. Prepare the journal entry to record the issuance of the convertible bonds.
22. Explain the treasury-share method as it applies to options and warrants in computing dilutive earnings per share data.
21. Explain how convertible securities are determined to be potentially dilutive ordinary shares and how those convertible securities that are not considered to be potentially dilutive ordinary shares enter into the determination of earnings per share data.
20. Discuss why options and warrants may be considered potentially dilutive ordinary shares for the computation of diluted earnings per share.
19. What are the computational guidelines for determining whether a convertible security is to be reported as part of diluted earnings per share?
18. Define the following terms.a. Basic earnings per share.b. Potentially dilutive security.c. Diluted earnings per share.d. Complex capital structure.e. Potential ordinary shares.
17. What effect do share dividends or share splits have on the computation of the weighted-average ordinary shares outstanding?
16. At December 31, 2025, Ruiz SA had 600,000 ordinary shares issued and outstanding, 400,000 of which had been issued and outstanding throughout the year and 200,000 of which were issued on October 1, 2025. Net income for 2025 was R$1,750,000, and dividends declared on preference shares were
15. What are the advantages of using restricted shares to compensate employees?
14. How is compensation expense for a share-option plan computed using the fair value approach?
13. Over what period of time should compensation cost for a share-option plan be allocated?
12. What date or event does the profession believe should be used in determining the value of a share compensation plan? What arguments support this position?
15 shares on each subsequent anniversary date. The purchase price is set at the market price on the date purchased less a 10% discount.How is this discount accounted for by Cordero?
11. Cordero Corporation has an employee share-purchase plan which permits all full-time employees to purchase 10 ordinary shares on the third anniversary of their employment and an additional
10. Briefly explain the accounting requirements for share compensation plans under IFRS.
9. What are share rights? How does the issuing company account for them?
8. On July 1, 2025, Roberts AG issued €3,000,000 of 9% bonds payable in 20 years. The bonds include warrants giving the bondholder the right to purchase for €30 one ordinary share of €1 par value at any time during the next 10 years. The bonds were sold for €3,000,000. The net present value
7. Four years after issue, debentures with a face value of £1,000,000 and book value of £960,000 are tendered for conversion into 80,000 ordinary shares immediately after an interest payment date. At that time, the market price of the debentures is 104, and the ordinary shares are selling at £14
6. What are the arguments for giving separate accounting recognition to the conversion feature of a convertible bond?
5. Explain how the conversion feature of convertible debt has a value(a) to the issuer and (b) to the purchaser.
4. Bridgewater SA offered holders of its 1,000 convertible bonds a premium of €160 per bond to induce conversion into ordinary shares. Upon conversion of all the bonds, Bridgewater SA recorded the €160,000 premium as a reduction of Share Premium—Ordinary.Comment on Bridgewater’s treatment
3. Discuss the similarities between convertible debt and debt issued with share warrants.
2. Briefly explain why companies issue convertible securities.
1. What is meant by a dilutive security?
*26. How is antidilution determined when multiple securities are involved?
25. What type of earnings per share presentation is required in a complex capital structure?
24. What is meant by the term antidilution? Give an example.
23. Earnings per share can affect market prices of ordinary shares.Can market prices affect earnings per share? Explain.
22. Explain the treasury-share method as it applies to options and warrants in computing dilutive earnings per share data.
21. Explain how convertible securities are determined to be potentially dilutive ordinary shares and how those convertible securities that are not considered to be potentially dilutive ordinary shares enter into the determination of earnings per share data.
20. Discuss why options and warrants may be considered potentially dilutive ordinary shares for the computation of diluted earnings per share.
19. What are the computational guidelines for determining whether a convertible security is to be reported as part of diluted earnings per share?
18. Define the following terms.a. Basic earnings per share.b. Potentially dilutive security.c. Diluted earnings per share.d. Complex capital structure.e. Potential ordinary shares.
17. What effect do share dividends or share splits have on the computation of the weighted-average ordinary shares outstanding?
16. At December 31, 2025, Ruiz SA had 600,000 ordinary shares issued and outstanding, 400,000 of which had been issued and outstanding throughout the year and 200,000 of which were issued on October 1, 2025. Net income for 2025 was R$1,750,000, and dividends declared on preference shares were
15. What are the advantages of using restricted shares to compensate employees?
14. How is compensation expense for a share-option plan computed using the fair value approach?
13. Over what period of time should compensation cost for a share-option plan be allocated?
12. What date or event does the profession believe should be used in determining the value of a share compensation plan? What arguments support this position?
11. Cordero Corporation has an employee share-purchase plan which permits all full-time employees to purchase 10 ordinary shares on the third anniversary of their employment and an additional 15 shares on each subsequent anniversary date. The purchase price is set at the market price on the date
10. Briefly explain the accounting requirements for share compensation plans under IFRS.
9. What are share rights? How does the issuing company account for them?
8. On July 1, 2025, Roberts AG issued €3,000,000 of 9% bonds payable in 20 years. The bonds include warrants giving the bondholder the right to purchase for €30 one ordinary share of €1 par value at any time during the next 10 years. The bonds were sold for €3,000,000. The net present value
7. Four years after issue, debentures with a face value of £1,000,000 and book value of £960,000 are tendered for conversion into 80,000 ordinary shares immediately after an interest payment date. At that time, the market price of the debentures is 104, and the ordinary shares are selling at £14

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