AC 302 CHAPTER 16 QUESTIONS AND PROBLEMS
Name Date
Instructor Course
Intermediate Accounting 14th Edition by Kieso Weygandt and Warfield
Primer on Using Excel in Accounting by Rex A Schildhouse
"E16-1 (Issuance and Conversion of Bonds)
Instructions:
For each of the unrelated transactions described below, present the entry(ies) required to record each transaction."
1. Coyle Corp. issued $10,000,000 par value 10% convertible bonds at
99 If the bonds had not been convertible, the company's investment banker estimates
they would have been sold at 95 Expenses of issuing the bonds were $70,000
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2. Lambert Company issued $10,000,000 par value 10% bonds at 98
One detachable stock warrant was issued with each $100 par value bond. At the time
of issuance, the warrants were selling for $4
Account Title Amount
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"3. Sepracor, Inc. called its convertible debt in 2012. Assume the following related to the transaction:
"
The 11% $10,000,000 par value bonds were converted into 1,000,000
shares of $1 par value common stock on July 1, 2012. On July 1, there was
$55,000 of unamortized discount applicable to the bonds, and the company paid an additional
$75,000 to the bondholders to induce conversion of all the bonds. The company records the
conversion using the book value method.
Account Title 75000 Amount
Account Title 10000000 Amount
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* Calculation as desired.
Name: Date:
Instructor: Course:
Intermediate Accounting, 14th Edition by Kieso, Weygandt, and Warfield
Primer on Using Excel in Accounting by Rex A Schildhouse
E16-15 (Weighted-Average Number of Shares) Gogean Inc. uses a calendar year for financial
reporting. The company is authorized to issue 9,000,000 shares of $10
par common stock. At no time has Gogean issued any potentially dilutive securities. Listed below is a summary of Gogean- common stock activities.
1. Number of common shares issued and outstanding at December 31, 2011 2,400,000
2. Shares issued as a result of a 10% stock dividend on September 30, 2012 240,000
3. Shares issued for cash on March 31, 2013 2,000,000
Number of common shares issued and outstanding at December 31, 2013 4,640,000
4. A 2-for-1 stock split of Gogean- common stock took place on March 31, 2014
Instructions:
"(a) Compute the weighted average number of common shares used in computing earnings per
common share for 2012 on the 2013 comparative income statement."
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Shares outstanding Formula
"(b) Compute the weighted average number of common shares used in computing earnings per
common share for 2013 on the 2013 comparative income statement."
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"(c) Compute the weighted average number of common shares to be used in computing earnings per
common share for 2013 on the 2014 comparative income statement."
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Shares outstanding Formula
"(d) Compute the weighted average number of common shares to be used in computing earnings per
common share for 2014 on the 2014 comparative income statement."
Text title Number
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Shares outstanding Formula
Name: Date:
Instructor: Course:
Intermediate Accounting, 14th Edition by Kieso, Weygandt, and Warfield
Primer on Using Excel in Accounting by Rex A Schildhouse
P16-2 (Entries for Conversion, Amortization, and Interest of Bonds) Volker Inc. issued
$2,500,000 of convertible 10 -year bonds on July 1, 2012. The bonds
provide for 12% interest payable semiannually on January 1 and July 1. The discount
in connection with the issue was $54,000 , which is being amortized monthly on a
straight-line basis.
The bonds are convertible after one year into 8 shares of Volker Inc.'s $100
par value common stock for each $1,000 of bonds.
On August 1, 2013, $250,000 of bonds were turned in for conversion into common stock.
Interest has been accrued monthly and paid as due. At the time of conversion any accrued interest on bonds being converted is paid in cash.
Note: Due to rounding and significant digits, there may be slight number differences.
Instructions:
Prepare the journal entries to record the conversion, amortization, and interest in connection with the bonds as of the following dates: (Round to the nearest dollar.)
(a) August 1, 2013. (Assume the book value method is used.)
Aug 1, 13 Account Title Amount
Account Title Amount
Account Title Amount
Account Title Amount
Enter entry memorandum.
Area for calculations as desired.
Area for calculations as desired.
Aug 1, 13 Account Title Amount
Account Title Amount
Enter entry memorandum.
(b) August 31, 2013.
Aug 31, 13 Account title Formula
Account title Amount
Enter entry memorandum.
Area for calculations as desired.
Aug 31, 13 Account Title 22,500
Account Title Amount
Enter entry memorandum.
(c) December 31, 2013, including closing entries for end-of-year.
Dec 31, 13 Account Title Amount
Account Title Amount
Enter entry memorandum.
Schedule 1 - Monthly Amortization Schedule
Unamortized discount on bonds payable:
Amount to be amortized over 120 months Amount
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Schedule 2 Interest Expense Schedule
Amortization of bond discount charged to bond interest expense in 2013 would be as follows:
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Total Formula
Interest on Bonds:
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Interest for 2013 would be as follows:
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Total Formula
Total interest
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Name: Date:
Instructor: Course:
Intermediate Accounting, 14th Edition by Kieso, Weygandt, and Warfield
Primer on Using Excel in Accounting by Rex A Schildhouse
P16-3 (Stock-Option Plan) Berg Company adopted a stock-option plan on November 30, 2011, that
provided that 70,000 shares of $5.00 par value stock be designated as available
for the granting of options to officers of the corporation at a price of $9.00 a share. The
market price was $12.00 a share on November 30, 2012.
On January 2, 2012, options to purchase 28,000 shares were granted to president
Tom Winter - 15,000 for services rendered in 2012 and 13,000 for services to
be rendered in 2013. Also on that date, options to purchase 14,000 shares were
granted to vice president Michelle Bennett - 7,000 for services to be rendered in 2012 and
7,000 for services to be rendered in 2013. The market value of the stock was
$14 a share on January 2, 2012. The options were exercisable for a period of one year
following the year in which the services were rendered. The fair value of the options on the grant date
was $4 per option.
In 2013 neither the president nor the vice president exercised their options because the market price
of the stock was below the exercise price. The market value of the stock was $8
a share on December 31, 2013, when the options for 2012 services lapsed.
On December 31, 2014, both president Winter and vice president Bennett exercised their options for
13,000 and 7,000 shares, respectively, when the market price was
$16 a share.
Instructions:
Prepare the necessary journal entries in 2011 when the stock-option plan was adopted, in 2012 when options were granted, in 2013 when options lapsed, and in 2014 when options were exercised.
Enter text answer here.
Jan 2, 12 Enter text answer as appropriate.
Dec 31, 12 Account title Amount
Account title Amount
Dec 31, 13 Account Title Amount
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Dec 31, 13 Account Title Amount
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Dec 31, 14 Account Title Amount
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