Question 5
Martinez Company‟s ledger shows the following balances on Decemb
er 31, 2012.
5% Preferred stock$10 par value, outstanding 22,480 shares $224,800
Common stock-$100 par value, outstanding 33,720 shares 3,372,000
Retained earnings 708,120
Assuming that the directors decide to declare total dividends in the am
ount of $298,984, determine how much each class of stock should rec
eive under each of the conditions stated below. One year‟s dividends
are in arrears on the preferred stock.
Question 6
On January 1, 2012, Barwood Corporation granted 5,040 options to e
xecutives. Each option entitles the holder to purchase one share of Bar
wood‟s $5 par value common stock at $50 per share at any time durin
g the next 5 years. The market price of the stock is $72 per share on th
e date of grant. The fair value of the options at the grant date is $154,0
00. The period of benefit is 2 years. Prepare Barwood‟s journal entries
for January 1, 2012, and December 31, 2012 and 2013.
Question 7
Rockland Corporation earned net income of $340,800 in 2012 and ha
d 100,000 shares of common stock outstanding throughout the year. A
lso outstanding all year was $908,800 of 10% bonds, which are conve
rtible into 18,176 shares of common. Rockland‟s tax rate is 40 percent
. Compute Rockland‟s 2012 diluted earnings per share.
Question 8
DiCenta Corporation reported net income of $250,000 in 2012 and ha
d 50,000 shares of common stock outstanding throughout the year. Al
so outstanding all year were 5,410 shares of cumulative preferred stoc
k, each convertible into 2 shares of common. The preferred stock pays
an annual dividend of $5 per share. DiCenta‟ tax rate is 40%. Comput
e DiCenta‟ 2012 diluted earnings per share.
Question 9
Ferraro, Inc. established a stock appreciation rights (SAR) program on
January 1, 2012, which entitles executives to receive cash at the date
of exercise for the difference between the market price of the stock an
d the pre-