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(solution) Please solve the following using the Excel spreadsheet. Thank you


Please solve the following using the Excel spreadsheet. Thank you


D E16-6 (Conversion of Bonds) On January I,2014, Gottlieb Corporation issued $4,000,000 of JO-year, 8%

 

convertible debentures at 102.lntercst is to be paid semiannually on June 30 and December 31.Each$1,000

 

debenture can be converted into eight shares of Gottlieb Corporation $100 par value common stock after

 

December 31,2015.

 

On January 1,2016, $400,.000 of debentures arc converted into common stock, which is then selling

 

at SllO. An additional $400,000 of debentures are converted on March 31,2016. The market price of the

 

common stock is then $115.Accrued interest at March 31will be paid on the next interest date.

 

Bond premium isamortized on a straight-Linc basis.

 

Instructions

 

Make the necessary journal entries for.

 

(a) O,,cember31,2015. (b) January I,2016. (c) March 31,2016.

 

(d) june3(J,2016. Record the conversions using the book value method. D E16·7 (Issuance of Bondswith Warrants) flliad lnc. has decided to raise additional capital by issuing

 

$170,000 face value of bonds with a coupon rate of 10%. ln discussions with investment bankers,it was

 

dctennincd that to help the sale of the bonds, detachable stock warrants should be issued at the rate of

 

one warran t for each $100 bond sold. The value of the bonds without the warran ts is considered to be

 

$136,000,and the value of the warran ts in the market is $24,000. The bondssold in the market at issuance

 

for $152,000.

 

Instructions

 

(a) What entry should be made at the time of the issuance of the bonds and warrants?

 

(b) lf the warran ts \?ere nondetachable,would the entriesbe different? Discuss. E16·22 (EPS with Convertible Bond s, Various Situations) In 2013, Chirac Enterprises issued, at par,

 

60 Sl,000,8% bonds,each convertible into 100 shares of common stock. Chime had revenuesof $17,500 and

 

cxpcnc;cs 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 bondswas converted or redeemed.

 

Instructions

 

(a) Compute diluted earnings P"r share ior 2014. (b) Assume the same facts as those assumed for part (a), except that the 60 bonds were issued on

 

September l,2014(rather than in 2013),and none have been converted or redeemed.

 

(c) Assume the same facts as assumed for part (a), except that 20 of the 60 bonds were actually

 

converted on July 1,2014, 1. What are: Convertable bonds

 

Stock warrants

 

Stock compensation plans

 

EPS 2. Whats a dilutive security?

 

3. What do we mean by Anti Dilutive EPS and Dilutive EPS vs Basic EPS 4. Compensation plans and ethics.

 

A little research on the internet time. Tell me something, how did we account for executive compensation plans 25 years ago.. THe web knows everything right? Lets see, if does.

 

Second thing: Whats your take on ethics vs morals? One in the same or different? Take that with the case. 5. CEO compensation for stock options/grants, were treated differently 20 years ago then they are now.. How?

 


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