My first Magazine AC 501 All Assignments | Page 17

useful life of 10 years with a salvage value of $ 10,000 at the end of that
time. Depreciation has been entered for 7 years on a straight-line basis.
In 2008, it is determined that the total estimated life should be 15 years
with a salvage value of $ 5,000 at the end of that time.
Instructions:
Prepare the entry (if any) to correct the prior years’ depreciation.
Prepare the entry to record depreciation for 2008.
E18-23: (EPS with Convertible Bonds and Preferred Stock) On January 1,
2008, Crocker Company issued 10-year, $ 2,000,000 face value, 6%
bonds, at par. Each $ 1,000 bond is convertible into 15 shares of
Crocker common stock. Crocker’s net income in 2008 was $ 300,000,
and its tax rate was 40%. The company had 100,000 shares of common
stock outstanding throughout 2008. None of the bonds were converted
in 2008.
Instructions:
Compute diluted earnings per share for 2008.
Compute diluted earnings per share for 2008, assuming the same facts
as above, except that $ 1,000,000 of 6% converti ble preferred stock
was issued instead of the bonds. Each $ 100 preferred shares are
convertible into 5 shares of Crocker’s common stock.