Prepare Barwood’s journal entries for January 1, 2014, and December 31, 2014 and 2015.

On January 1, 2014, Barwood Corporation granted 5,000 options to executives. Each option entitles the holder to purchase one share of Barwood’s $5 par value common stock at $50 per share at any time during the next 5 years. The market price of the stock is $65 per share on the date of grant. The fair value of the options at the grant date is $150,000. The period of benefit is 2 years.

Prepare Barwood’s journal entries for January 1, 2014, and December 31, 2014 and 2015. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts.)

Date
Account Titles and Explanation
Debit
Credit
1/1/14
12/31/14
12/31/15

Brief Exercise 16-12

Rockland Corporation earned net income of $300,000 in 2014 and had 100,000 shares of common stock outstanding throughout the year. Also outstanding all year was $800,000 of 10% bonds, which are convertible into 16,000 shares of common. Rockland’s tax rate is 40 percent.

Compute Rockland’s 2014 diluted earnings per share. (Round answer to 2 decimal places, e.g. $3.55.)

Diluted earnings per share
$

Brief Exercise 16-16

Ferraro, Inc. established a stock-appreciation rights (SAR) program on January 1, 2014, which entitles executives to receive cash at the date of exercise for the difference between the market price of the stock and the pre-established price of $20 on 5,000 SARs. The required service period is 2 years. The fair value of the SARs are determined to be $4 on December 31, 2014, and $9 on December 31, 2015.

Compute Ferraro’s compensation expense for 2014 and 2015.

Ferraro’s compensation expense 2014
$

Ferraro’s compensation expense for 2015
$

Brief Exercise 17-1

Garfield Company purchased, as a held-to-maturity investment, $80,000 of the 9%, 5-year bonds of Chester Corporation for $74,086, which provides an 11% return.

Prepare Garfield’s journal entries for (a) the purchase of the investment, and (b) the receipt of annual interest and discount amortization. Assume effective-interest amortization is used. (Round answers to 0 decimal places, e.g. 1,225. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts.)

No.
Account Titles and Explanation
Debit
Credit
(a)
(b)

Exercise 17-11

Arantxa Corporation made the following cash purchases of securities during 2014, which is the first year in which Arantxa invested in securities.

1. On January 15, purchased 10,000 shares of Sanchez Company’s common stock at $33.50 per share plus commission $1,980.
2. On April 1, purchased 5,000 shares of Vicario Co.’s common stock at $52 per share plus commission $3,370.
3. On September 10, purchased 7,000 shares of WTA Co.’s preferred stock at $26.50 per share plus commission $4,910.

On May 20, 2014, Arantxa sold 4,000 shares of Sanchez Company’s common stock at a market price of $35 per share less brokerage commissions, taxes, and fees of $3,850. The year-end fair values per share were Sanchez $30, Vicario $55, and WTA $28. In addition, the chief accountant of Arantxa told you that Arantxa Corporation plans to hold these securities for the long term but may sell them in order to earn profits from appreciation in prices.

(a) Prepare the journal entries to record the above three security purchases. (Round answers to 0 decimal places, e.g. 2,500. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts.)

No.
Date
Account Titles and Explanation
Debit
Credit
(1)
Jan. 15, 2014
(2)
Apr. 1, 2014
(3)
Sep. 10, 2014

(b) Prepare the journal entry for the security sale on May 20. (Round answers to 0 decimal places, e.g. 2,500. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts.)

Date
Account Titles and Explanation
Debit
Credit
May 20, 2014

(c) Compute the unrealized gains or losses. (Round answer to 0 decimal places, e.g. 2,500.)

Unrealized

$

Prepare the adjusting entries for Arantxa on December 31, 2014. (Round answers to 0 decimal places, e.g. 2,500. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts.)

Date
Account Titles and Explanation
Debit
Credit
Dec. 31, 2014

Exercise 17-12

The following are two independent situations.

Situation 1

Conchita Cosmetics acquired 10% of the 200,000 shares of common stock of Martinez Fashion at a total cost of $13 per share on March 18, 2014. On June 30, Martinez declared and paid a $75,000 cash dividend. On December 31, Martinez reported net income of $122,000 for the year. At December 31, the market price of Martinez Fashion was $15 per share. The securities are classified as available-for-sale.

Situation 2

Monica, Inc. obtained significant influence over Seles Corporation by buying 30% of Seles’s 30,000 outstanding shares of common stock at a total cost of $9 per share on January 1, 2014. On June 15, Seles declared and paid a cash dividend of $36,000. On December 31, Seles reported a net income of $85,000 for the year.

Prepare all necessary journal entries in 2014 for both situations. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts.)

Date
Account Titles and Explanation
Debit
Credit
Conchita Cosmetics
March 18, 2014
June 30, 2014
Dec. 31, 2014
Monica, Inc
Jan. 1, 2014
June 15, 2014
Dec. 31, 2014
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