Problem: The following is a comparative balance sheet for a firm for fiscal year 2002 (in millions of dollars):
|
|
2002
|
2001
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|
|
2002
|
2001
|
|
Operating Cash
|
60
|
50
|
|
Accounts Payable
|
1200
|
1040
|
|
Short-Term Investments (at market)
|
550
|
500
|
|
Accrued Liabilities
|
390
|
450
|
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Accounts Receivable
|
940
|
790
|
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Long-term debt
|
1840
|
1970
|
|
Inventory
|
910
|
840
|
|
|
|
|
|
Property and Plant'
|
2840
|
2710
|
|
Common Equity
|
1870
|
1430
|
|
5300
|
4890
|
|
|
5300
|
4890
|
|
|
|
|
|
|
|
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The following is the statement of common shareholders’ equity for 2002 (in millions of dollars):
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Balance, end of fiscal year 2001
|
1,430
|
|
Share issues from exercised employee stock options
|
810
|
|
Repurchase of 24 million shares
|
(720)
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Cash dividend
|
(180)
|
|
Tax benefit from exercise of employee stock options
|
12
|
|
Unrealized gain on investments
|
50
|
|
Net income
|
468
|
|
Balance, end of fiscal year 2002
|
1,870
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The firm’s income tax rate is 35%. The firm reported $15 million in interest income and $98 million in interest expense for 2002. Sales revenue was $3,726 million.
Q1. Calculate the loss to shareholders from the exercise of employee stock options during 2002.
Q2. The shares repurchased were in settlement of a forward purchase agreement. The market price of the shares at the time of the repurchase was $25 each. What was the effect of this transaction on the income for the shareholders?
Q3. Prepare a comprehensive income statement that distinguishes after-tax operating income from financing income and expense. Include gains or losses from the transactions in questions (a) and (b) above.