Assignment
1. XYZ, INC. had net income of $10 million for the year. It had outstanding 1 million common stock shares until September 30th when it issued another 500,000 shares (1,500,000 at year-end). XYZ also had 50,000 preferred shares that paid a $4 annual dividend. The preferred stock was convertible into common stock at the rate of 2 common shares for each preferred share.
a. Calculate the company's basic AND fully diluted earnings per share
2. a. Describe the basic accounting treatment for Stock Options and explain how and why companies might use them.
b. Locate a major company that issued stock options in the recent past. Provide a link or upload the financial statements (notes) for the company. What was the major reason the company issued the options? Do you believe the accounting treatment is reasonable?
3. Garcia Corporation's balance sheet and income statement appear below:
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Comparative Balance Sheet
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Assets:
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Ending Balance
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Beginning Balance
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Cash and cash equivalents
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$ 36
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$ 33
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|
Accounts receivable
|
46
|
41
|
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Inventory
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53
|
59
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Plant and equipment
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472
|
460
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Accumulated depreciation
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( 218)
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( 214)
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Total assets
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$389
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$379
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Liabilities and stockholders' equity:
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|
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Accounts payable
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$ 52
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$ 62
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Long-term debt
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289
|
330
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Common stock
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84
|
80
|
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Retained earnings
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( 36)
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( 93)
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Total liabilities and stockholders' equity
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$389
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$379
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Income Statement
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Sales
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$737
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Cost of goods sold
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454
|
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Gross margin
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283
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Selling and administrative expense
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173
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Net operating income
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110
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Income taxes
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33
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Net income
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$ 77
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Cash dividends were $20.
Prepare a statement of cash flows in good form using the indirect method.