Thanks for offering to help. Primarily I need help just answering the two questions and a basic run through of the concept.
A. On December 31, 2015, Entity A Company had 100,000 shares of common stock outstanding
and 30,000 shares of 7%, $100 par, cumulative preferred stock outstanding. The following events
On February 28, 2016, Entity A purchased 24,000 shares of common stock on the open
market as treasury stock paying $45 per share.
Entity A sold 6,000 of the treasury shares on September 30, 2016, for $47 per share.
Net income for 2016 was $540,000. The income tax rate is 40%.
Outstanding at December 31, 2015, were fully vested incentive stock options giving key
personnel the option to buy 50,000 common shares at $40. The market price of the
common shares averaged $50 during 2016. No stock options were exercised during the
Five thousand 6% bonds were issued at par on January 1, 2016. Each $1,000 bond is
convertible into 125 shares of common stock. None of the bonds had been converted by
December 31, 2016.
Compute basic and diluted earnings per share (rounded to 2 decimal places) for Entity A for 2016.
B. What is restricted stock? Who owns the stock? Describe how compensation expense is
determined and recorded for a restricted stock plan.