Foyle, Inc, had 700,000 shares of common stock issued and 2014.OnJudy 1, 2015-an

Question

Foyle, Inc, had 700,000 shares of common stock issued and 2014.OnJudy 1, 2015-anad " 40,000 shares common slock 20,000 o at e beginning and end of 2015. The average market prics number of shares that should te for eear eded Foyle also had Foyles common stock was $20 duning 2015 What is e used in compuing diluted eanings per share a. 700000 b. 727.500 c. 725,000 d. 720,000 e. None of the above 2. On January 1, 2014, Sharp Corp. granted an employse an option to purchase 12.000 shares of Sharps $5 par value common stock at $20 per share. The Black-Scholes opition pricing model determines total compensation expense to be $240,000. The option became exercisable on December 31, 2016, after the employee completed three years of service. The market prices of Sharp's stock were as follows January 1, 2014 December 31, 2015 $30 50 should recognize compensation expense under the fair value method of a. $80,000. b. $70,000 c $120,000. d. $24,000. 3. On January 2, 2014, for past services, Rosen Corp. granted New Pine, its 150,000 stock appreciation rights that are exercisable immediately January 2, 2015. On exercise, price of the stock on the exercise date over the market price on the grant date. New did not exercise any of the rights during 2014. The market price of Rosens stock was January 2, 2014, and $25 on December 31, 2014. As a result of the stock appreciation and expire orn New is entitled to receive cash for the excess of the market $20 on rights, Rosen should recognize compensation expense for 2014 of a. $0. b. $3,000,000. c. $750,000. d. $3,750,000. 4. Litke Corporation issued at a discount of $5,000 a $100,000 bond issue convertible into 2,000 shares of common stock (par value $10). At the time of the conversion, the unamortized discount is $3,000, the market value of the bonds is $110,000, and the stock is quoted on the market at $60 per share. If the bonds are converted into common, what isthe amount of paid in capital in excess of par to be recorded on the conversion of the bonds? a. $58,000 b. $62,000 c. $77,000 d. $80,000 The pre-emptive right of a common stockholder is the right to a. share proportionately in corporate assets upon liquidation. b. share proportionately in any new issues of stock of the same class. c. receive cash dividends before they are distributed to preferred stockholders. d. exclude preferred stockholders from voting rights.

Explanation / Answer

Solution 1:

Amount to be paid for stock option = 20000*15 = $300,000

Value of option in current shares = Amount paid to exercise option / Current market price = $300,000 / 20 = 15000 shares

Diluted shares = Option issued - Value of option in current shares= 20000 - 15000 = 5000

Weighted average outstanding shares = 700000*6/12 + 740000*6/12

= 720000 shares

Nos of shared to be used in calculation of diluted EPS = Weighted average outstanding shares + diluted share of stock option

=720000 + 5000 = 725000

Hence option c is correct.

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