Reference no: EM131784158

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%