1.)
On January 1, 2012, Bailey
Industries had stock outstanding as follows. 6% Cumulative preferred stock,
$119 par value, issued and outstanding 10,900 shares $1,297,100 Common stock,
$11 par value, issued and outstanding 283,200 shares 3,115,200 To acquire the
net assets of three smaller companies, Bailey authorized the issuance of an
additional 270,000 common shares. The acquisitions took place as shown below.
Date of Acquisition Shares
Issued
Company A April 1, 2012 110,400
Company B July 1, 2012 130,800
Company C October 1, 2012 28,800
On May 14, 2012, Bailey realized a $150,000
(before taxes) insurance gain on the expropriation of investments originally
purchased in 2000.
On
December 31, 2012, Bailey recorded net income of $318,000 before tax and
exclusive of the gain. Assuming a 42% tax rate, compute the earnings per share
data that should appear on the financial statements of Bailey Industries as of
December 31, 2012. Assume that the expropriation is extraordinary. (Round
answer to 2 decimal places, e.g. $2.55.)
2. The per share market prices of the common
stock on selected dates were as follows.
Price per Share July 1, 2012 $20
January 1, 2013 21 April 1, 2013 25
July 1, 2013 11
August 1, 2013 10.5
November 1, 2013 9
December 31, 2013 10 3.
A total of 662,400 shares of an authorized
1,374,000 shares of convertible preferred stock had been issued on July 1,
2012. The stock was issued at its par value of $25, and it has a cumulative
dividend of $3 per share. The stock is convertible into common stock at the
rate of one share of convertible preferred for one share of common.
The rate of conversion is to be
automatically adjusted for stock splits and stock dividends. Dividends are paid
quarterly on September 30, December 31, March 31, and June 30.
4. Thompson Corporation is subject to a 40%
income tax rate.
5. The after-tax net income for
the year ended December 31, 2013, was $11,800,000. The following specific
activities took place during 2013.
1. January 1—A 5% common stock dividend was
issued. The dividend had been declared on December 1, 2012, to all stockholders
of record on December 29, 2012.
2. April 1—A total of 458,400 shares of the $3
convertible preferred stock was converted into common stock. The company issued
new common stock and retired the preferred stock. This was the only conversion
of the preferred stock during 2013.
3. July 1—A 2-for-1 split of the
common stock became effective on this date. The board of directors had
authorized the split on June 1
. 4. August 1—A total of 291,600
shares of common stock were issued to acquire a factory building.
5. November 1—A total of 29,400
shares of common stock were purchased on the open market at $9 per share. These
shares were to be held as treasury stock and were still in the treasury as of
December 31, 2013.
6. Common stock cash
dividends—Cash dividends to common stockholders were declared and paid as
follows. April 15—$0.30 per share October 15—$0.20 per share 7. Preferred stock
cash dividends—Cash dividends to preferred stockholders were declared and paid
as scheduled.
(a) Determine the number of
shares used to compute basic earnings per share for the year ended December 31,
2013. (Round answer to 0 decimal places, e.g. 1,500.) Number of shares to
compute basic earnings per share
b) Determine the number of
shares used to compute diluted earnings per share for the year ended December
31, 2013. (Round answer to 0 decimal places, e.g. 1,500.) Number of shares to
compute diluted earnings per share
(c) Compute the adjusted net income to be used
as the numerator in the basic earnings per share calculation for the year ended
December 31, 2013. Adjusted net income $10691200
