29 Jun Question 1)Wolf Company issued 1,000 of its $1,000 face amount, 20-year bonds on June 30, 2010, for $1,020,000. Each bond carries five detachable stock purchase warrants, each of which entitles
Question
1)Wolf Company issued 1,000 of its $1,000 face amount, 20-year bonds on June 30, 2010, for $1,020,000. Each bond carries five detachable stock purchase warrants, each of which entitles the holder to purchase for $60 one share of Wolf’s common stock. On June 30, 2010, the market prices were $50 per share of Wolf’s common stock and $5 per warrant. In its June 30, 2010, balance sheet, at what amount should Wolf report the carrying amount of the bonds?
a. $995,000
b. $1,000,000
c. $1,020,000
d. $1,045,000
2) Information relating to the capital structure of Parke Corporation is as follows:
` December 31
2008 2009
Outstanding shares of:
Common stock 90,000 90,000
Preferred stock, convertible into 30,000 shares of common 30,000 30,000
10% convertible bonds, convertible into 20,000 shares
Of common $1,000,000 $1,000,000
During 2009 Parke paid $45,000 dividends on the preferred stock, which is considered a common stock equivalent. The convertible bonds are not considered common stock equivalents. Parke’s net income for 2009 was $980,000 and the income tax rate was 40%.
A). For the year ended December 31, 2009, the primary earnings per share is:
a. $10.89
b. $10.39
c. $8.17
d. $7.79
B) For the year ended December 31, 2009, the fully diluted earnings per share is:
a. $9.82
b. $8.29
c. $7.71
d. $7.43
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