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Chapter 16: Q7BE (page 874)

Refer to the data for Barwood Corporation in BE16-6. Repeat the requirements assuming that instead of options, Barwood granted 2,000 shares of restricted stock.

Short Answer

Expert verified

Unearned revenue will be debited by $130,000, common stock will be credited by $10,000, and Paid-in Capital in Excess of Par— Common Stock under the credit of $120,000. Compensation expense will be $65,000 debit for 2017 and 2018, and unearned compensation is $65,000 credit for 2017 and 2018.

Step by step solution

01

The given information is as follows:

Restricted stock 2000 shares

02

Journal entry

Date

Description

DEBIT

CREDIT

1/1/17

Unearned Compensation

$130,000

Common Stock (2,000 X $5)

$10,000

Paid in Capital in Excess of Par— Common Stock

$120,000

Being unearned compensation at par

12/31/17

Compensation Expense

$65,000

Unearned Compensation

$65,000

Being compensation expense incurred

12/31/18

Compensation Expense

$65,000

Unearned Compensation

$65,000

Being compensation expense incurred

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Most popular questions from this chapter

Rockland Corporation earned net income of \(300,000 in 2017 and had 100,000 shares of common stock outstanding throughout the year. Also outstanding all year was \)800,000 of 9% bonds, which are convertible into 16,000 shares of common. Rockland’s tax rate is 40%. Compute Rockland’s 2017 diluted earnings per share.

Discuss why options and warrants may be considered potentially dilutive common shares for the computation of diluted earnings per share.

E16-28 (L05) (EPS with Warrants) Howat Corporation earned \(360,000 during a period when it had an average of 100,000 shares of common stock outstanding. The common stock sold at an average market price of \)15 per share during the period. Also outstanding were 15,000 warrants that could be exercised to purchase one share of common stock for $10 for each warrantexercised.

Instructions

(a) Are the warrants dilutive?

(b) Compute basic earnings per share.

(c) Compute diluted earnings per share.

Explain how convertible securities are determined to be potentially dilutive common shares and how those convertible securities that are not considered to be potentially dilutive common shares enter into the determination of earnings per share data.

Eisler Corporation issued 2,000 \(1,000 bonds at 101. Each bond was issued with one detachable stock warrant. After issuance, the bonds were selling in the market at 98, and the warrants had a market price of \)40. Use the proportional method to record the issuance of the bonds and warrants.
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