# Chapter 16 Old Quiz Answers - 2. (6 points) On January 1,...

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Name: ___________________________________________ ACCT 304 - Fall 2009 – Chapter 16 Quiz Instructions: Please show all work. Please write your answer CLEARLY. 1. Colson Corp. had \$500,000 net income in 2011. On January 1, 2011 there were 200,000 shares of common stock outstanding. On April 1, 20,000 shares were issued and on September 1, Adcock bought 30,000 shares of treasury stock. The market price of the common stock averaged \$50 during 2011. During 2011, there were 40,000 shares of 3.5% \$100 cumulative preferred stock outstanding with no dividends in arrears. a. (2 points) Compute the weighted average common shares outstanding for 2011. 200,000 * (3/12) = 50,000 220,000 * (5/12) = 91,667 190,000 * (4/12) = 63,333 Weighted Average = 205,000 b. (2 points) Compute Basic Earnings per Share. Preferred Dividends = 40,000 * 3.5% * \$100 = \$140,000 Basic EPS = (\$500,000 - \$140,000)/205,000 = \$1.76
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Unformatted text preview: 2. (6 points) On January 1, 2009, Lane Company granted 1,000 stock options to employees. A fair value option pricing model determined that the total value for this compensation is \$45,000. The employees had to continue working for the company for 3 years before they could exercise the options. On February 10 th 2012, half of the employees chose to exercise their options. Each option allowed the employee to purchase a share of \$1 par common stock for \$10 per share. Show the correct journal entries on each of the following dates: January 1, 2009: No entry on grant date. December 31, 2009: Dr. Compensation Expense (\$45,000/3) \$15,000 Cr. Paid in Capital – Stock Options \$15,000 February 10, 2012: Dr. Cash (\$10 * 500) \$5,000 Dr. Paid in Capital – Stock Options (.5 * 45,000) 22,500 Cr. Common Stock @ par (\$1 * 500) \$500 Cr. Additional Paid in Capital – CS 27,000...
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## This note was uploaded on 11/30/2009 for the course ACCT 10022 taught by Professor Brink during the Fall '09 term at VCU.

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