On January 1, 2016, Garner issued 10-year, $200,000 face value, 6% bonds at par. Each $1,000...
On January 1, 2016, Garner issued 10-year, $200,000 face value, 6% bonds at par. Each $1,000 bond is convertible into 30 shares of Garner $2 par value common stock. The company has had 10,000 shares of common stock (and no preferred stock) outstanding throughout its life. None of the bonds have been converted as of the end of 2017. (Ignore all tax effects.)
Requirement 1:
A.) Accounting Prepare the journal entry Garner would have made on January 1, 2016, to record the issuance of the bonds.
B.) Garner’s net income in 2017 was $30,000 and was $27,000 in 2016. Compute basic and diluted earnings per share for Garner for 2017 and 2016.
C.) Assume that 75% of the holders of Garner’s convertible bonds convert their bonds to stock on June 30, 2018, when Garner’s stock is trading at $32 per share. Garner pays $50 per bond to induce bondholders to convert. Prepare the journal entry to record the conversion.
Requirement 2:
A.) Analysis Show how Garner will report income and EPS for 2017 and 2016. Briefly discuss the importance of GAAP for EPS to analysts evaluating companies based on price-earnings ratios. Consider comparisons for a company over time, as well as comparisons between companies at a point in time.
Homework Answers
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On January 1, 2016, Garner issued 10-year, $200,000 face value,
6% bonds at par. Each $1,000...
Accounting, Analysis, and Principles On January 1, 2016, Garner issued 10-year, $200,000 face value, 6% bonds...
Accounting, Analysis, and Principles
On January 1, 2016, Garner issued 10-year, $200,000 face value,
6% bonds at par. Each $1,000 bond is convertible into 30 shares of
Garner $2 par value common stock. The company has had 10,000 shares
of common stock (and no preferred stock) outstanding throughout its
life. None of the bonds have been converted as of the end of 2017.
(Ignore all tax effects.)
Prepare the journal entry Garner would have made on January 1,
2016, to...
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throughout its life. None of the bonds have been converted as of
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Accounting, Analysis, and Principles
On January 1, 2016, Garner issued 10-year, $200,000 face value,
6% bonds at par. Each $1,000 bond is convertible into 30 shares of
Garner $2 par value common stock. The company has had 10,000 shares
of common stock (and no preferred stock) outstanding throughout its
life. None of the bonds have been converted as of the end of 2017.
(Ignore all tax effects.)
Prepare the journal entry Garner would have made on January 1,
2016, to...
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6% bonds at par. Each $1,000 bond is convertible into 30 shares of
Concord $2 par value common stock. The company has had 10,000
shares of common stock (and no preferred stock) outstanding
throughout its life. None of the bonds have been converted as of
the end of 2020. (Ignore all tax effects.)
a. Prepare the journal entry Concord would have made on January
1, 2019, to record the issuance...
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face value, 6% bonds, at par. Each $1,000 bond is convertible into
14 shares of Pronghorn common stock. Pronghorn’s net income in 2017
was $311,000, and its tax rate was 40%. The company had 101,000
shares of common stock outstanding throughout 2017. None of the
bonds were converted in 2017.
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(Round answer to 2 decimal places, e.g.
$2.55.)
Diluted earnings per
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$...
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