Exam 19: Share-Based Compensation and Earnings Per Share

Rice Inc.had 420 million shares of common stock and 1 million shares of 6%,$200 par,cumulative preferred stock outstanding at the end of 2015 and 2016.No dividends were declared or paid on either class of stock in either year.Net income for 2016 was $398.4 million.The company's tax rate is 30%. Required: Compute basic earnings per share for the year ended December 31,2016.

Blue Cab Company had 50,000 shares of common stock outstanding on January 1,2016.On April 1,2016,the company issued 20,000 shares of common stock.The company had outstanding fully vested incentive stock options for 5,000 shares exercisable at $10 that had not been exercised by its executives.The end-of-year market price of common stock was $13 while the average price for the year was $12.The company reported net income in the amount of $269,915 for 2016.What is the diluted earnings per share (rounded)?

Compare the concepts of basic and diluted earnings per share with respect to their calculation.

Burns Company reported $752.4 million in net income in 2016.On January 1,2016,the company had 400 million shares of common stock outstanding.On March 1,2016,24 million new shares of common stock were sold for cash.On June 1,2016,the company's common stock split 2 for 1.On July 1,2016,8 million shares were reacquired as treasury stock. Required: Compute Burns' basic earnings per share for the year ended December 31,2016.

How many types of potential common shares must a corporation have in order to be said to have a complex capital structure?

On January 1,2016,Oliver Foods issued stock options for 40,000 shares to a division manager.The options have an estimated fair value of $5 each.To provide additional incentive for managerial achievement,the options are not exercisable unless Oliver Foods' stock price increases by 5% in four years.Oliver Foods initially estimates that it is not probable the goal will be achieved.How much compensation will be recorded in each of the next four years?

Purple Cab Company had 50,000 shares of common stock outstanding on January 1,2016.On April 1,2016,the company issued 20,000 shares of common stock.The company had outstanding fully vested incentive stock options for 5,000 shares exercisable at $10 that had not been exercised by its executives.The average market price of common stock was $12.The company reported net income in the amount of $269,915 for 2016.What is the basic earnings per share (rounded)?

The compensation associated with a share of restricted stock under a stock award plan is:

When calculating diluted earnings per share,stock options:

At December 31,2016,Hansen Corporation had 50,000 shares of common stock and 5,000 shares of 6%,$100 par cumulative preferred stock outstanding.No dividends were declared or paid in 2016.Net income was reported as $200,000.What is basic EPS?

What is the treasury stock method of accounting for stock options,warrants,and rights?

What is restricted stock? Describe how compensation expense is determined and recorded for a restricted stock plan.

What is meant by dilution of earnings per share?

The tax code differentiates between qualified and nonqualified incentive plans.What are the major differences in tax treatment between the two?

What is Rudyard's basic EPS?

On January 1,2016,Jeans-R-Us Company awarded 15 million of its $1 par common shares to key personnel,subject to forfeiture if employment is terminated within three years.On the date of the grant,the stock had a market price of $3 per share. Required: (1. )Determine the total compensation cost pertaining to the restricted shares. (2. )Prepare the appropriate journal entry to record the award on January 1,2016. (3. )Prepare the appropriate journal entry to record compensation expense on December 31,2016. (4. )Prepare the appropriate journal entry to record compensation expense on December 31,2017. (5. )Prepare the appropriate journal entry to record compensation expense on December 31,2018. (6. )Prepare the appropriate journal entry to record the lifting of restrictions on December 31,2018.

Preferred dividends would not be subtracted from earnings when computing basic earnings per share in a year when the dividends are not declared if the preferred stock is:

On December 31,2015,Brisbane Company had 100,000 shares of common stock outstanding and 30,000 shares of 7%,$50 par,cumulative preferred stock outstanding.On February 28,2016,Brisbane purchased 24,000 shares of common stock on the open market as treasury stock paying $40 per share.Brisbane sold 6,000 treasury shares on September 30,2016,for $45 per share.Net income for 2016 was $180,905.Also outstanding during the year were fully vested incentive stock options giving key personnel the option to buy 50,000 common shares at $40.The market price of the common shares averaged $50 during 2016. Required: Compute Brisbane's basic and diluted earnings per share (rounded to 2 decimal places)for 2016.

Which is the correct entry to record the exercise of 90% the options on April 15,2019,when the market price of the stock was $8?

Flyaway Travel Company reported net income for 2016 in the amount of $90,000.During 2016,Flyaway declared and paid $2,125 in cash dividends on its nonconvertible preferred stock.Flyaway also paid $10,000 cash dividends on its common stock.Flyaway had 40,000 common shares outstanding from January 1 until 10,000 new shares were sold for cash on April 1,2016.What is 2016 basic earnings per share?