As at 31 December 2018, Conrad Company has 850,000 ordinary shares outstanding with par value of...

As at 31 December 2018, Conrad Company has 850,000 ordinary shares outstanding with par value of $5 each that originally issued at $15 per share. On 1 April 2019, Conrad issued 100,000 shares of 8%, $10 par value cumulative convertible preference shares (convertible into 200,000 common shares) and purchased 60,000 ordinary shares on the open market as treasury stock by paying $30 per share.

On 1 June 2019, Conrad declared and issued a 2-for-1 share split. The company also issued 120,000 ordinary shares for cash at $22 per share on 1 November 2019. One month later, the company paid $500,000 cash dividends on the ordinary shares because of the significant increase of sales revenue.

There were incentive share options granted to key executives of the company as at 31 December 2019. The options are exercisable as of 15 September 2018, for 60,000 shares at an exercise price of $20 per share. During 2019, the average and ending market price of ordinary shares were $25 and $30 per share respectively.

During the year 2018, 6% convertible bonds were issued at par for $1,000,000. Each $1,000 bond is convertible into 250 ordinary shares.

Conrad’s net income for the year ended 31 December 2019 was $2.5 million and the income tax rate is 30%. There was neither conversion of the convertible bonds nor exercise of the incentive share options during the year of 2019.

Required: (Answers should be rounded to the nearest 2 decimal places)

Compute the weighted average number of shares outstanding during the year.

Calculate the basic earnings per share (EPS) for 2019.

Calculate the diluted earnings per share for 2019.

Assume the options exercisable for 60,000 shares is at an exercise price of $28 per share granted in 2019, explain how does it affect your answer in part (c) above. [within 80 words]

Explain the rationale, with appropriate accounting principles/concepts, of presenting the diluted EPS, apart from the basic EPS, for companies with complex capital structure. [within 100 words]

Expert Solution

ekkarill92 answered 2 years ago

11.) Melon Company has outstanding 400,000 shares of $10 par value ordinary shares. The company declares...

11.) Melon Company has outstanding 400,000 shares of $10 par value ordinary shares. The company declares a 5% shares dividend when the fair value of the shares is $65 per share. Prepare the journal entries for Melon Company for both the date of declaration and the date of distribution. 12.) Use the information from QUESTION 11, but assume Melon Company declared a 100% shares dividend rather than a 5% shares dividend. Prepare the journal entries for both the date of...

Mustang Corporation had 100,000 shares of $2 par value common stock outstanding. On December 31, 2018,...

Mustang Corporation had 100,000 shares of $2 par value common stock outstanding. On December 31, 2018, the company's board of directors declares a 20 percent stock dividend. This stock dividend will be distributed on January 20, 2019 to the stockholders of record on January 15, 2019. The market price of the company's stock is $10 per share on December 31, 2018. Complete the necessary journal entry to record the declaration of the stock dividend by selecting the account names from...

Sheffield Inc. was authorized to issue 100000 £10 par value ordinary shares. As of December 31,...

Sheffield Inc. was authorized to issue 100000 £10 par value ordinary shares. As of December 31, 2020, the company had issued 54000 shares at an average price of £22 per share. During 2020, the company felt that the shares were undervalued so it purchased 9800 treasury shares at £16 per share. When the share price rebounded later in the year, the company sold 4200 of the treasury shares for £24 per share. Retained earnings was £1666000 at December 31, 2020....

Marigold Corp. has 2,700 shares of 8%, $103 par value preferred stock outstanding at December 31,...

Marigold Corp. has 2,700 shares of 8%, $103 par value preferred stock outstanding at December 31, 2017. At December 31, 2017, the company declared a $120,500 cash dividend. Determine the dividend paid to preferred stockholders and common stockholders under each of the following scenarios. 1. The preferred stock is noncumulative, and the company has not missed any dividends in previous years. The dividend paid to preferred stockholders $ The dividend paid to common stockholders $ 2. The preferred stock is...

Swifty Corporation has 2,000 shares of 10%, $130 par value preferred stock outstanding at December 31,...

Swifty Corporation has 2,000 shares of 10%, $130 par value preferred stock outstanding at December 31, 2020. At December 31, 2020, the company declared a $140,000 cash dividend. Determine the dividend paid to preferred stockholders and common stockholders under each of the following scenarios. 1. The preferred stock is noncumulative, and the company has not missed any dividends in previous years. The dividend paid to preferred stockholders $ The dividend paid to common stockholders $ 2. The preferred stock is...

Celebrity Inc. has the following shares outstanding at December 31, 2019: Common shares, $1,500,000 no par...

Celebrity Inc. has the following shares outstanding at December 31, 2019: Common shares, $1,500,000 no par value, 10,000 shares issued and outstanding, unlimited number authorized. Preferred shares, $200,000, $5.00, no par value, non voting shares, 2,000 shares issued and outstanding. The preferred shares are cumulative and non-participating. Dividends have not been declared for the past two years. Dividends declared are $30,000. What is the total common share dividends?

On 1 January 2019, Colson Company had 200,000 ordinary shares outstanding with par value of $l...

On 1 January 2019, Colson Company had 200,000 ordinary shares outstanding with par value of $l each that originally issued at $18 per share. On 1 April 2019, 20,000 ordinary shares were issued at $25 per share and on 1 May, the company issued 5% bonus issue as stock dividend for both ordinary shares and preference shares. During the year, 30,000 treasury shares were repurchased from the open market at $35 on 1 September 2019. On 1 March 2019, the...

Finic company has outstanding 50,000 shares of $50 par ordinary shares which had been issued at...

Finic company has outstanding 50,000 shares of $50 par ordinary shares which had been issued at $60 per share. Finic then entered into the following transactions: 1 Issued 60,000 10% 5-year bonds at 102 2 Issued additional 5,000 shares at a price of $65 per share. 3 Purchased 2,500 treasury shares at a price of $57 per share. 4 The board declared cash dividends at a rate of $1.40 per share. 5 Paid dividends declared in item 4 6 Recorded...

On December 31, Year 5, Par Company purchased 70% of the outstanding common shares of Sub...

On December 31, Year 5, Par Company purchased 70% of the outstanding common shares of Sub Company for $8,750,000 million in cash. On that date, the shareholders’ equity of Sub consisted of $2 million in common shares and $6 million in retained earnings. For the year ended December 31, Year 10, the income statements for Par and Sub were as follows: Par Sub Sales $ 24,800,000 $ 12,000,000 Other Income 4,000,000 1,000,000 Cost of goods sold 18,000,000 8,200,000 Depreciation expense...

On December 31, Year 2, Palm Inc. purchased 80% of the outstanding ordinary shares of Storm...

On December 31, Year 2, Palm Inc. purchased 80% of the outstanding ordinary shares of Storm Company for $350,000. At that date, Storm had ordinary shares of $240,000 and retained earnings of $64,000. In negotiating the purchase price, it was agreed that the assets on Storm’s statement of financial position were fairly valued except for plant assets, which had a $44,000 excess of fair value over carrying amount. It was also agreed that Storm had unrecognized intangible assets consisting of...

Question