Fayuz Ltd. issued $300,000, 12%, 10-year bonds on July 1, 2020. Interest payments dates are January 2 and July 1. The issue price was $293,400. The bonds are convertible into common shares at the rate of 15 common shares for each $1,000 bond. The market price of Fayuz Ltd. common shares has risen steadily over the last two years and on July 1, 2022, half of the bonds are converted into common shares. a) Compute the balance in the premium or discount account on date of conversion. Fayuz Ltd. uses the straight-line method of amortization. b) Prepare the entry to convert half of the bonds into common shares.

Fayuz Ltd. issued $300,000, 12%, 10-year bonds on July 1, 2020. Interest payments dates are January 2 and July 1. The issue price was $293,400. The bonds are convertible into common shares at the rate of 15 common shares for each $1,000 bond. The market price of Fayuz Ltd. common shares has risen steadily over the last two years and on July 1, 2022, half of the bonds are converted into common shares. a) Compute the balance in the premium or discount account on date of conversion. Fayuz Ltd. uses the straight-line method of amortization. b) Prepare the entry to convert half of the bonds into common shares.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter16: Retained Earnings And Earnings Per Share

Section: Chapter Questions

Problem 26E: Tama Companys capital structure consists of common stock and convertible bonds. At the beginning of...

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Frost Company has accumulated the following information relevant to its 2019 earningsper share. 1. Net income for 2019: 150,500. 2. Bonds payable: On January 1, 2019, the company had issued 10%, 200,000 bonds at 110. The premium is being amortized in the amount of 1,000 per year. Each 1,000 bond is currently convertible into 22 shares of common stock. To date, no bonds have been converted. 3. Bonds payable: On December 31, 2017, the company had issued 540,000 of 5.8% bonds at par. Each 1,000 bond is currently convertible into 11.6 shares of common stock. To date, no bonds have been converted. 4. Preferred stock: On July 3, 2018, the company had issued 3,800 shares of 7.5%, 100 par, preferred stock at 108 per share. Each share of preferred stock is currently convertible into 2.45 shares of common stock. To date, no preferred stock has been converted and no additional shares of preferred stock have been issued. The current dividends have been paid. 5. Common stock: At the beginning of 2019, 25,000 shares were outstanding. On August 3, 7,000 additional shares were issued. During September, a 20% stock dividend was declared and issued. On November 30, 2,000 shares were reacquired as treasury stock. 6. Compensatory share options: Options to acquire common stock at a price of 33 per share were outstanding during all of 2019. Currently, 4,000 shares may be acquired. To date, no options have been exercised. The unrecognized compens Frost Company has accumulated the following information relevant to its 2019 earnings ns is 5 per share. 7. Miscellaneous: Stock market prices on common stock averaged 41 per share during 2019, and the 2019 ending stock market price was 40 per share. The corporate income tax rate is 30%. Required: 1. Compute the basic earnings per share. Show supporting calculations. 2. Compute the diluted earnings per share. Show supporting calculations. 3. Indicate which earnings per share figure(s) Frost would report on its 2019 income statement.