Robinson Textiles Ltd. (Robinson) is a publicly accountable entity that manufactures various textile products. Robinson's average...

  

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Robinson Textiles Ltd. (Robinson) is a publicly accountable entity that manufactures various textile products. Robinson's average share price during the December 31, 2019, fiscal year was $24. The year-end closing price of Robinson on December 31, 2019, was $26. Robinson's capital structure as at December 31, 2018, included the following: • $4,000,000, 4.4%, semi-annual bonds maturing on December 31, 2027. At the option of the holder, each $1,000 bond can be converted into seven common shares. • 550,000 common shares issued with a book value of $4,500,000 • 50,000 cumulative preferred shares. Each preferred share is entitled to dividends of $3 per annum. At the option of the shareholder, each preferred share can be converted into one common share at any time after January 1, 2024. During the 2019 fiscal year, Robinson's capital transactions included the following: • July 1, 2019– repurchased 10,000 common shares for $12 per share and immediately cancelled them. October 1, 2019 - granted employees the right to purchase 12,000 common shares for $21 each at any time after October 1, 2021. Employees must remain in the employment of Robinson until October 1, 2021, in order to exercise these stock options. The fair value of the stock options granted at the grant date was estimated to be $360,000. As at December 31, 2018, Robinson had a contributed surplus balance of $100,000, which was the result of a previous common share repurchase transaction. During the 2019 fiscal year, Robinson did NOT declare or pay any dividends. Robinson is subject to tax at a rate of 22%. Robinson's net income for the year ended December 31, 2019, totalled $2,872,500. Required: a) For the purposes of part (a) only, assume that management expects 100% of the stock options to vest. Calculate Robinson's basic and diluted earnings per share for the year ended December 31, 2019. (10 marks) b) Prepare the journal entry to record the July 1, 2019, repurchase of common shares. (2 marks) c) Assume that management estimates that the number of options that will vest is 85% as at December 31, 2019, and 92% as at December 31, 2020. Prepare the journal entry to record compensation expense resulting from the option grant for the years ended December 31, 2019, and December 31, 2020. (4 marks) Robinson Textiles Ltd. (Robinson) is a publicly accountable entity that manufactures various textile products. Robinson's average share price during the December 31, 2019, fiscal year was $24. The year-end closing price of Robinson on December 31, 2019, was $26. Robinson's capital structure as at December 31, 2018, included the following: • $4,000,000, 4.4%, semi-annual bonds maturing on December 31, 2027. At the option of the holder, each $1,000 bond can be converted into seven common shares. • 550,000 common shares issued with a book value of $4,500,000 • 50,000 cumulative preferred shares. Each preferred share is entitled to dividends of $3 per annum. At the option of the shareholder, each preferred share can be converted into one common share at any time after January 1, 2024. During the 2019 fiscal year, Robinson's capital transactions included the following: • July 1, 2019– repurchased 10,000 common shares for $12 per share and immediately cancelled them. October 1, 2019 - granted employees the right to purchase 12,000 common shares for $21 each at any time after October 1, 2021. Employees must remain in the employment of Robinson until October 1, 2021, in order to exercise these stock options. The fair value of the stock options granted at the grant date was estimated to be $360,000. As at December 31, 2018, Robinson had a contributed surplus balance of $100,000, which was the result of a previous common share repurchase transaction. During the 2019 fiscal year, Robinson did NOT declare or pay any dividends. Robinson is subject to tax at a rate of 22%. Robinson's net income for the year ended December 31, 2019, totalled $2,872,500. Required: a) For the purposes of part (a) only, assume that management expects 100% of the stock options to vest. Calculate Robinson's basic and diluted earnings per share for the year ended December 31, 2019. (10 marks) b) Prepare the journal entry to record the July 1, 2019, repurchase of common shares. (2 marks) c) Assume that management estimates that the number of options that will vest is 85% as at December 31, 2019, and 92% as at December 31, 2020. Prepare the journal entry to record compensation expense resulting from the option grant for the years ended December 31, 2019, and December 31, 2020. (4 marks)

Answer rating: 100% (QA)

REQUIREMENT A Computation of Weighted Average Outstanding Shares January 1 balance ... View the full answer