Brief Exercise 16-4
Eisler Corporation issued 2,460 $1,000 bonds at 102. Each bond was issued with one detachable stock warrant. After issuance, the bonds were selling in the market at 98, and the warrants had a market price of $44.
Use the proportional method to record the issuance of the bonds and warrants.
Brief Exercise 16-9
Kalin Corporation had 2014 net income of $1,222,500. During 2014, Kalin paid a dividend of $4 per share on 80,311 shares of preferred stock. During 2014, Kalin had outstanding 230,500 shares of common stock.
Compute Kalin's 2014 earnings per share.
Exercise 16-2
Aubrey Inc. issued $5,876,400 of 8%, 10-year convertible bonds on June 1, 2014, at 98 plus accrued interest. The bonds were dated April 1, 2014, with interest payable April 1 and October 1. Bond discount is amortized semiannually on a straight-line basis.
On April 1, 2015, $2,203,650 of these bonds were converted into 34,500 shares of $16 par value common stock. Accrued interest was paid in cash at the time of conversion.
(a) Prepare the entry to record the interest expense at October 1, 2014. Assume that accrued interest payable was credited when the bonds were issued.
(b) Prepare the entry to record the conversion on April 1, 2015. (Book value method is used.) Assume that the entry to record amortization of the bond discount and interest payment has been made.
Exercise 16-20
On January 1, 2014, Lennon Industries had stock outstanding as follows.
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6% Cumulative preferred stock, $106 par value, issued and outstanding 0,400 shares
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$1,102,400
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Common stock, $12 par value, issued and outstanding 273,600 shares
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3,283,200
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To acquire the net assets of three smaller companies, Lennon authorized the issuance of an additional 252,000 common shares. The acquisitions took place as shown below.
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Date of Acquisition
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Shares Issued
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Company A April 1, 2014
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103,200
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Company B July 1, 2014
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123,600
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Company C October 1, 2014
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25,200
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On May 14, 2014, Lennon realized a $145,200 (before taxes) insurance gain on the expropriation of investments originally purchased in 2000.
On December 31, 2014, Lennon recorded net income of $412,800 before tax and exclusive of the gain.
Assuming a 47% tax rate, compute the earnings per share data that should appear on the financial statements of Lennon Industries as of December 31, 2014. Assume that the expropriation is extraordinary.