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ch16tc - CHAPTER 16 DILUTIVE SECURITIES AND EARNINGS PER...

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Chapter 16-1 C H A P T E R C H A P T E R 16 16 DILUTIVE SECURITIES AND DILUTIVE SECURITIES AND EARNINGS PER SHARE EARNINGS PER SHARE Intermediate Accounting 13th Edition Kieso, Weygandt, and Warfield
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Chapter 16-2 1. Describe the accounting for the issuance, conversion, and retirement of convertible securities. 2. Explain the accounting for convertible preferred stock. 3. Contrast the accounting for stock warrants and for stock warrants issued with other securities. 4. Describe the accounting for stock compensation plans under generally accepted accounting principles. 5. Discuss the controversy involving stock compensation plans. 6. Compute earnings per share in a simple capital structure. 7. Compute earnings per share in a complex capital structure. Learning Objectives Learning Objectives
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Chapter 16-3 Should companies report these instruments as a liability or equity . Debt and Equity Debt and Equity Stock Options Stock Options ConvertibleSecurities ConvertibleSecurities Preferred Stock Preferred Stock
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Chapter 16-4 (at theholder’s option) Benefit of a Bond (guaranteed interest) Privilegeof Exchanging it for Stock Bonds which can beconverted into other corporatesecurities are called convertible bonds. + Accounting for Convertible Debt Accounting for Convertible Debt LO 1 Describetheaccounting for theissuance, conversion, and retirement of convertiblesecurities.
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Chapter 16-5 Desire to raise equity capital without giving up more ownership control than necessary. Obtain common stock financing at cheaper rates. Two main reasons corporations issue convertibles: Accounting for Convertible Debt Accounting for Convertible Debt LO 1 Describetheaccounting for theissuance, conversion, and retirement of convertiblesecurities.
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Chapter 16-6 At Timeof Issuance Accounting for Convertible Debt Accounting for Convertible Debt LO 1 Describetheaccounting for theissuance, conversion, and retirement of convertiblesecurities. Convertible bonds recorded as straight debt issue, with any discount or premium amortized over theterm of thedebt.
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Chapter 16-7 BE16-1 BE16-1 : KC Inc. issued $4,000,000 par value, 7% convertiblebonds at 99 : KC Inc. issued $4,000,000 par value, 7% convertiblebonds at 99 for cash. If the bonds had not included theconversion feature, they would for cash. If the bonds had not included theconversion feature, they would have sold for 95. have sold for 95. Cash 3,960,000 Bonds payable 4,000,000 Journal entry at dateof issuance: Discount on bonds payable 40,000 ($4,000,000 x 99% = $3,960,000) Accounting for Convertible Debt Accounting for Convertible Debt LO 1 Describetheaccounting for theissuance, conversion, and retirement of convertiblesecurities.
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Chapter 16-8 At Timeof Conversion Accounting for Convertible Debt Accounting for Convertible Debt LO 1 Describetheaccounting for theissuance, conversion, and retirement of convertiblesecurities.
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