Reference no: EM132492541

For each of the unrelated situations described below, prepare the entries required to record the transactions.

• On August 1, 2017, Alpha Corporation called its 10% convertible bonds for conversion. The $4,000,000 par value bonds were converted into 160,000 no par common shares. On August 1, there was $350,000 of unamortized premium applicable to the bonds. At the time of issuance, Contributed Surplus-Conversion Rights was credited for $150,000, which represented the equity portion of the convertible bonds, and the market value of the common shares was $20 per share.

Question 1: The company records the conversion using the book value method. Ignore all interest payments.

Barker Inc. reported net income (30% tax rate) of $1,600,000 for calendar 2017, and an average of 500,000 common shares outstanding during the year. Barker issued $2,000,000 par value, 10-year, 9% convertible bonds on January 1, 2015 at a $18,000 discount. The bonds are convertible into 60,000 common shares. Barker uses the straight-line method for amortizing the bond discount.

Instructions

Question 2: Calculate basic and diluted earnings per share for 2017.