Questions -
1) Basic and diluted EPS
Assume that the following data relative to Eddy Company for 2007 is available:
Net Income $2,100,000
Transactions in Common Shares Change Cumulative
Jan. 1, 2007, Beginning number 700,000
Mar. 1, 2007, Purchase of treasury shares (60,000) 640,000
June 1, 2007, Stock split 2-1 640,000 1,280,000
Nov. 1, 2007, Issuance of shares 120,000 1,400,000
8% Cumulative Convertible Preferred Stock
Sold at par, convertible into 200,000 shares of common (adjusted for split). $1,000,000
Stock Options
Exercisable at the option price of $25 per share. Average market price in 2007, $30 (market price and option price adjusted for split). 60,000 shares
Instructions -
(a) Compute the basic earnings per share for 2007.
(b) Compute the diluted earnings per share for 2007.
2) Percentage Completion Accounting
Parcell Company contracted on 4/1/07 to construct a building for $2,500,000. The project was completed in 2009. Additional data follow:
2007 2008 2009
Costs incurred to date $ 560,000 $1,350,000 $1,900,000
Estimated cost to complete 1,040,000 450,000 -
Billings to date 500,000 2,000,000 2,500,000
Collections to date 400,000 1,300,000 2,400,000
Instructions -
(a) Calculate the income recognized by Parcell under the percentage-of-completion method of accounting in each of the years 2007, 2008, and 2009.
(b) Prepare all necessary entries for the year 2008.
(c) Present the balance sheet disclosures at December 31, 2008. Proper headings or subheadings must be indicated.
3) Measuring, recording, and reporting pension expense and liability
Eckert, Inc. on January 1, 2008 initiated a noncontributory, defined-benefit pension plan that grants benefits to its 100 employees for services rendered in years prior to the adoption of the pension plan. The total expected service-years of the 100 employees who are expected to receive benefits under the plan is 1,200. An actuarial consulting firm has indicated that the present value of the projected benefit obligation on January 1, 2008 was $5,040,000. On December 31, 2008 the following information was provided concerning the pension plan's operations for its first year.
Employer's contribution at end of year $1,600,000
Service cost 600,000
Projected benefit obligation 6,043,000
Plan assets (at fair value) 1,600,000
Expected return on plan assets 9%
Settlement rate 8%