ADMS 3595 Lecture Notes - Lecture 4: Ice King, Preferred Stock, Weighted Arithmetic Mean

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8 Jun 2018

School

York University

Department

Administrative Studies

Course

ADMS 3595

Professor

Yong Troy

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ADMS3595 - Chapter 17

Supplementary Question

Question 1:

Company A had 200,000 ordinary shares on Jan. 1. The company issued 10,000 new shares on

April 1. On June 1, the ordinary shares were split 2 for 1. On Oct. 1, the company met

contingency conditions that led to 10,000 new ordinary shares being issued on Dec. 1.

Required:

1. Calculate the weighted average number of shares for the year ended Dec. 31.

2. Calculate the basic EPS assuming that the company had earnings of $300,000 and declared

non-cumulative preference share dividends of $25,000 during the year.

Question 2:

Ice King Products Incorporated reported after-tax profit of $6.5 million in 20X5. Its capital

structure included the following as of 31 December 20X5, the end of the company's fiscal year:

Shareholders' equity:

• Preferred shares, $4.50, no-par, cumulative, convertible into common shares at the rate of

two common shares for each preferred share, shares outstanding, 150,000

• Preferred shares, $2.50, no-par, cumulative, convertible into common shares at the rate of

one common share for each preferred share, shares outstanding, 400,000

• Common shares, shares outstanding, 1,500,000

Options to purchase common shares (options have been outstanding all year):

• Purchase price, $20; expire 20X11, 100,000 options

• Purchase price, $52; expire 20X14, 200,000 options

Each option allows the purchase of one share.

Transactions during 20X5:

• On 1 July, 400,000 common shares were issued on the conversion of 200,000 of the

$4.50 preferred shares.

• On 1 December, 100,000 common shares were issued for cash.

Additional information:

• Average common share price, stable during the year, $40

• Tax rate, 25%

• Quarterly dividends were declared on 31 March, 30 June, 30 September, and 31

December

Required:

Calculate basic and diluted earnings per share.

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Document Summary

Company a had 200,000 ordinary shares on jan. 1. On june 1, the ordinary shares were split 2 for 1. On oct. 1, the company met contingency conditions that led to 10,000 new ordinary shares being issued on dec. 1. Required: calculate the weighted average number of shares for the year ended dec. 31, calculate the basic eps assuming that the company had earnings of ,000 and declared non-cumulative preference share dividends of ,000 during the year. Ice king products incorporated reported after-tax profit of . 5 million in 20x5. Its capital structure included the following as of 31 december 20x5, the end of the company"s fiscal year: Options to purchase common shares (options have been outstanding all year): purchase price, ; expire 20x11, 100,000 options, purchase price, ; expire 20x14, 200,000 options. Each option allows the purchase of one share. Transactions during 20x5: on 1 july, 400,000 common shares were issued on the conversion of 200,000 of the.

Related Questions

WW CO has 10,000 shares of $100 par value, 6% convertible stock and50,000 shares of $10 par value common stock outstanding at Dec 31,2010.

1. If the preferred stock is cumulative and dividends were lastpaid on the prederred stock on Dec 31, 2007, what are the dividendsin the arrears that should be reported on the Dec 31, 2010 on theballance sheet. How should these dividends be reported?

2. If the preferred stock is convertible into 7 shares of $10 parvalue common stock and 3000 shares are converted, what entry isrequired for the conversion assuming the preffered stock was issuedat par value?

3. If the preferred stock was issued at $107 per share, how shouldthe preferred stock be reported in the Stockholders equity section?

emeraldhippopotamus590

Complete each question record transactions

Question 1

Hernandez Company had the following stock transactions duringthe year:

Issued 25,000 shares of $1 par common stock for $25,000.
Issued 20,000 shares of $1 par common stock for $22,000cash.
Issued 22,000 shares of $1 par common stock for $21,000cash.
Issued 2,000 shares of $50 par, 8% preferred stock for $100,000cash.
Issued 1,000 shares of $50 par, 8% preferred stock for $49,000cash.
Issued 1,000 shares of $50 par 8% preferred stock for$51,500
Issued 2,500 shares of no-par common stock for $11,875 cash
Issued 1,500 shares of no par 7% preferred stock for $72,000cash.

Question 2

Kris Kraft Stores had the following stock transactions duringthe year.

Issued 4,000 shares of no par common stock with a stated valueof $10 per share for $40,000 cash.
Issued 6,000 shares of no par common stock with a stated valueof $8 per share for $50,000 cash.
Issued 5,000 shares of no par 6% preferred stock with a statedvalue of $15 per share for $75,000 cash.
Issued 3,000 shares of no par 6% preferred stock with a statedvalue of $20 per share for $58,000 cash.
Issued 10,000 shares of $8 par common stock with a $9 fairmarket value for a building with an uncertain fair marketvalue.
Issued 10,000 shares of $5 common stock for land with a fairmarket value of $50,000.
Issued 8,000 shares of $50 par, 8% preferred stock for land witha fair market value of $405,000.

Question 3

During the year ended December 21, 2013, Smith Company completedthe following transactions:

04/15 Declared a semiannual dividend of $0.80 per share onpreferred stock and $0.05 per share on common stock to shareholdersof record on 05/05, payable on 05/10. Currently, 4,000shares of $100 par preferred stock and 50,000 shares of $1 parcommon stock are outstanding.
05/05 Record date of record entry.
05/10 Paid cash dividends.
10/15 Declared semiannual dividend of $0.80 per share onpreferred stock and $0.50 per share on common stock to shareholdersof record on November 5, payable on November 20.
11/5 Record date of record entry.
11/20 Paid cash dividends
11/22 Declared a 10% stock dividend to shareholders of record onDecember 8, distributable on December 16. Market valueof the common stock was estimated to be $8.
12/08 Record date of record entry.
12/16 issued certificated for common stock dividend.
12/20 Board of directors declared a two for one common stocksplit.

Exercise 11-2 Sheridan Company had these transactions during the current period. June 12 Issued 84,000 shares of $1 par value common stock for cash of $315,000. July 11 Issued 3,400 shares of $102 par value preferred stock for cash at $107 per share. Nov. 28 Purchased 1,350 shares of treasury stock for $8,150.

Prepare the journal entries for the Sheridan Company transactions shown above.

On January 1, Marigold Corp. had 61,700 shares of no-par common stock issued and outstanding. The stock has a stated value of $4 per share. During the year, the following transactions occurred.

Apr. 1		Issued 12,600 additional shares of common stock for $12 per share.
June 15		Declared a cash dividend of $1.50 per share to stockholders of record on June 30.
July 10		Paid the $1.50 cash dividend.
Dec. 1		Issued 5,600 additional shares of common stock for $11 per share.
Dec. 15		Declared a cash dividend on outstanding shares of $1.70 per share to stockholders of record on December 31.

(a)

Prepare the entries, if any, on each of the three dates that involved dividends.

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ADMS 3595 Lecture Notes - Lecture 4: Ice King, Preferred Stock, Weighted Arithmetic Mean

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