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eight shares of Gottlieb Corporation $100 par value common stock after
December 31, 2015.
E16-7 (Issuance of Bonds with Warrants)
Illiad Inc. has decided to raise additional capital by issuing $170,000
face value of bonds with a coupon rate of 10%. In discussions with
investment bankers, it was determined that to help the sale of the bonds,
detachable stock warrants should be issued at the rate of one warrant for
each $100 bond sold. The value of the bonds without the warrants is
cons idered to be $136,000, and the value of the warrants in the market is
$24,000. The bonds sold in the market at issuance for $152,000.
E16-12
(Issuance, Exercise, and Termination of Stock Options)
On January 1, 2013, Nichols Corporation granted 10,000 options to key
executives. Each option allows the executive to purchase one share of
Nichols’ $5 par value common stock at a price of $20 per share. The
options were exercisable within a 2-year period beginning January 1,
2015, if the grantee is still employed by the company at the time of the
exercise. On the grant date, Nichols’ stock was trading at $25 per share,
and a fair value option-pricing model determines total compensation to
be $400,000.
E16-22(EPS with Convertible Bonds, Various Situations)
In 2013, Chirac Enterprises issued, at par, 60 $1,000, 8% bonds, each
convertible into 100 shares of common stock. Chirac had revenues of
$17,500 and expenses other than interest and taxes of $8,400 for 2014.
(Assume that the tax rate is 40%.) Throughout 2014, 2,000 shares of
common stock were outstanding; none of the bonds was converted or
redeemed.
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