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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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