Jackson Company had the following information for 2020:

1. Common Stock Share transactions:

1/1: 100,000 shares of c/s issued and 7,000 shares t/s.

3/1 Purchased 2,000 shares of treasury stock

7/ 1: Issued 11,000 shares of common stock

9/1 Reissued 1,000 shares of treasury stock

2. Jackson’s 2020 Net Income was $475,000
3. On 4/1/2020, Jackson issued 3,000 shares of cumulative, convertible p/s. The stock is $100 par value, 8% stock, and each share is convertible into 5 shares of common stock.    No dividend was declared in 2020.
4. Jackson has Convertible bonds. $800,000, 12% bonds. The bonds were issued for $860,652 with a yield of 10% on 1/1/2019. Interest is paid annually on December 31. Jackson uses the effective interest method to determine interest expense. Each $1,000 bond is convertible into 20 shares of common stock. (you will need to create an amortization table to compute interest expense)
5. Jackson has 13,000 options with an exercise price of $6. The average market price of Jackson’s stock this year is $11.
6. Jackson’s tax rate was 20%

Required:

1. Compute Basic Earnings per Share. (you need to compute weighted average shares)
2. Compute Diluted EPS, showing incremental EPS for each dilutive security and proving if each security is dilutive
3. Using the information above and assuming that Common Stock has a par value of $1 and P/S was originally purchased for $130 per share, complete the following.
   1. Prepare the journal entry assuming that $200,000 of the bonds were converted on 1/1/21. On this date the stock was trading for $18.
   2. Prepare the journal entry assuming the P/S was converted on 1/1/21. On this date the stock was trading for $18.
4. Prepare the journal entries for Silverfish.
   1. On 1/1/2020 Silverfish issued 1,000 options to purchase $2 par C/S at $25 in 4 years. The fair value of the options is $210,000 and the current market price of the stock is $19. (hint it will be the same journal entry every year so you can just write it once and state all the dates that entry would be recorded). The options have a 3-year service life.
   2. On 1/1/2024 150 of the options were exercised.

Answer rating: 100% (QA)

Answer Compute Basic Earnings per Share Jackson Company had the following information for 2020 Common Stock Share transactions 11 100000 shares of cs issued and 7000 shares ... View the full answer