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Chapter 16: Q25Q (page 874)
What type of earnings per share presentation is required in a complex capital structure?
An organization with a complex capital structure report both basic EPS and diluted EPS in the financial statements.
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(Issuance of Bonds with Detachable Warrants) On September 1, 2017, Sands Company sold at 104 (plus accrued interest) 4,000 of its 9%, 10-year, \(1,000 face value, nonconvertible bonds with detachable stock warrants. Each bond carried two detachable warrants. Each warrant was for one share of common stock at a specified option price of \)15 per share. Shortly after issuance, the warrants were quoted on the market for \(3 each. No fair value can be determined for the Sands Company bonds. Interest is payable on December 1 and June 1. Bond issue costs of \)30,000 were incurred.
Prepare in general journal format the entry to record the issuance of the bonds
All of the following are key similarities between GAAP and IFRS with respect to accounting for dilutive securities and EPS except:
(a) the model for recognizing stock-based compensation.
(b) the calculation of basic and diluted EPS.
(c) the accounting for convertible debt.
(d) the accounting for modifications of share options, when the value increases.
Archer Inc. issued $4,000,000 par value, 7% convertible bonds at 99 for cash. If the bonds had not included the conversion feature, they would have sold for 95. Prepare the journal entry to record the issuance of the bonds.
Four years after issue, debentures with a face value of \(1,000,000 and book value of \)960,000 are tendered for conversion into 80,000 shares of common stock immediately after an interest payment date. At that time, the market price of the debentures is 104, and the common stock is selling at \(14 per share (par value \)10). The company records the conversion as follows. Bonds Payable 1,000,000 Discount on Bonds Payable 40,000 Common Stock 800,000 Paid-in Capital in Excess of Par鈥� Common Stock 160,000 Discuss the propriety of this accounting treatment.
Over what period of time should compensation cost be allocated?
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