Calculate diluted earnings per share

Question

Problem 1 During 2012 Nova, Inc. made several treasury stock transactions. For each of the following give the entry(s) that Nova would have made. Nova uses the cost method and the par value of common stock is $10.

• On February 1st Nova purchased in the stock market 1000 shares of their $10 par value stock. They paid $15 per share.
• On March 1, Nova reissued 200 shares of its common stock at $17 per share.
• On June 2, Nova reissued another 200 shares of its common stock at $20 per share.
• On July 1st, Nova reissued the remaining 600 shares of its treasury stock at $11 per share.

Problem 2 Also during 2012 Nova made the following common stock transactions (class B stock). For each of the following give the entry(s) that Nova would have made. The common stock has a par value of $10.

1. On January 5th, Nova issued a property dividend. Investments (stock in the ABC company) comprising of 1000 shares was issued. The stock has a fair market value of $25 per share. The stock cost Nova $20 per share. They issued the ABC stock one month later.
2. On February 14, Nova declared a 10% stock dividend (assume 92,623 shares of $10 par outstanding stock). On that date market value of the stock was $14. One month later they issued the common stock dividend.
3. On August 12th, Nova declared a cash dividend of $.50 per share of common stock. On August 12th there were 92,623 shares of $10 par value stock issued and outstanding.
4. On October 14th, Nova issued a 2 for 1 stock split.
5. On May 15th, Nova issued 5,000 shares of cumulative 8% preferred stock with a par value of $100 for $112 per share.
6. Assume the following: At the end of the year there were 92,623 shares of common stock outstanding and 5,000 shares of non-cumulative/non-participating 8% preferred stock outstanding. Nova wants to issue cash dividends totaling $77,050. Calculate how much goes to preferred stock holders and common stock holders.

Problem 3 Refer the information in Problem 2  and calculate basic earnings per share. Refer to Problem-2 (e). Use net income of $91,855.

Problem 4 Refer to Problem-3 information and your answer . Assume that Nova had 1000 convertible bonds payable outstanding. The bonds pay 2% interest annually and mature in 2020. Further assume that the bonds are convertible at the rate of 100 shares of $10 par value stock per bond. The stock's market value is $12 per share. Calculate diluted earnings per share. The marginal tax rate is 30%.