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malfutka [58]
2 years ago
10

Company A has 279,000 basic shares outstanding and 26,000 outstanding options and warrants. The exercise price of these options

is $3.75. The company also has $200,000 of convertible bonds with an effective conversion price of $4.00. The average market share price for the reporting period is $7.50. What is the diluted shares outstanding using the treasury stock method
Business
1 answer:
lesya [120]2 years ago
8 0

Answer:

c. 342,000

Explanation:

Missing question and Multiple Option <em>" & if-converted methods?  305,000, 292,000, 342,000, 345,333"</em>

<em />

Proceeds expected if option are exercised = No of outstanding options and warrants * Per share exercise price

Proceeds expected if option are exercised = 26,000 * $3.75

Proceeds expected if option are exercised = $97,500

Number of treasury shares expected to be purchased = Proceeds expected if option are exercised  / Average market price per share

Number of treasury shares expected to be purchased = $97,500 / $7.50

Number of treasury shares expected to be purchased = $13,000

Number of new shares issued if conversion is effected = Amount of convertible bonds reported / Effective conversion price per share

Number of new shares issued if conversion is effected = $200,000 / $4

Number of new shares issued if conversion is effected = 50,000

Calculation of the Diluted Share Outstanding

Number of basic shares outstanding                                   279,000

Add: Number of new shares through options                     26,000

Add: Number of new shares through conversion issued   50,000

Less: Number of treasury shares to be purchased             <u>(13,000)  </u>

Diluted Share Outstanding                                                   <u>342,000</u>

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Answer:

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   Item                 Impairment   Amortization    Depletion

                             Expense         Expense          Expense

a. Timber rights                                                  $304,000

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To record the depletion expense for Timber rights.

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              Accumulated Goodwill Impairment                $1,110,000

To record the impairment loss for Goodwill

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To record the amortization expense for Patent.

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Used board feet of timber = 1,600,000

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Amortization per annum = $608,000 ($9,120,000/15)

Amortization for the current year = $456,000 ($608,000 * 3/4)

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