Assignment
I. On January 1, 2013, VKI Corporation awarded 12 million of its $1 par common shares to key personnel, subject to forfeiture if employment is terminated within three years. On the grant date, the shares have a market price of $2.50 per share.
Required: 1. Determine the total compensation cost pertaining to the restricted shares.
2. Prepare the appropriate journal entry to record the award of restricted shares on January 1, 2013.
3. Prepare the appropriate journal entry to record compensation expense on December 31, 2013.
4. Prepare the appropriate journal entry to record compensation expense on December 31, 2014.
5. Prepare the appropriate journal entry to record compensation expense on December 31, 2015.
6. Prepare the appropriate journal entry to record the lifting of restrictions on the shares at December 31, 2015.
II. American Optical Corporation provides a variety of share-based compensation plans to its employees. Under its executive stock option plan, the company granted options on January 1, 2013, that permit executives to acquire 4 million of the company's $1 par common shares within the next five years, but not before December 31, 2014 (the vesting date). The exercise price is the market price of the shares on the date of grant, $14 per share. The fair value of the 4 million options, estimated by an appropriate option pricing model, is $3 per option. No forfeitures are anticipated. Ignore taxes.
Required: 1. Determine the total compensation cost pertaining to the options.
2. Prepare the appropriate journal entry to record the award of options on January 1, 2013.
3. Prepare the appropriate journal entry to record compensation expense on December 31, 2013.
4. Prepare the appropriate journal entry to record compensation expense on December 31, 2014.
III. For the year ended December 31, 2013, Norstar Industries reported net income of $655,000. At January 1, 2013, the company had 900,000 common shares outstanding. The following changes in the number of shares occurred during 2013:
30-Apr Sold 60,000 shares in a public offering.
24-May Declared and distributed a 5% stock dividend.
01-Jun Issued 72,000 shares as part of the consideration for the purchase of assets from a subsidiary
Required: Compute Norstar's earnings per share for the year ended December 31, 2013.
IV. "(Note: This is a variation of E 19-15 modified to include convertible bonds).
On December 31, 2012, Berclair Inc. had 200 million shares of common stock and 3 million shares of 9%, $100 par value cumulative preferred stock issued and outstanding. On March 1, 2013, Berclair purchased 24 million shares of its common stock as treasury stock. Berclair issued a 5% common stock dividend on July 1, 2013. Four million treasury shares were sold on October 1. Net income for the year ended December 31, 2013, was $150 million. The income tax rate is 40%.
Also outstanding at December 31 were incentive stock options granted to key executives on September 13, 2008. The options are exercisable as of September 13, 2012, for 30 million common shares at an exercise price of $56 per share. During 2013, the market price of the common shares averaged $70 per share.
$62.5 million of 8% bonds, convertible into 6 million common shares, were issued at face value in 2009."
Required: Compute Berclair's basic and diluted earnings per share for the year ended December 31, 2013.