Reference no: EM131790891

Assignment

1. XYZ, INC. had net income of $10 million for the year. It had outstanding 1 million common stock shares until September 30th when it issued another 500,000 shares (1,500,000 at year-end). XYZ also had 50,000 preferred shares that paid a $4 annual dividend. The preferred stock was convertible into common stock at the rate of 2 common shares for each preferred share.

a. Calculate the company's basic AND fully diluted earnings per share

2. a. Describe the basic accounting treatment for Stock Options and explain how and why companies might use them.
b. Locate a major company that issued stock options in the recent past. Provide a link or upload the financial statements (notes) for the company. What was the major reason the company issued the options? Do you believe the accounting treatment is reasonable?

3. Garcia Corporation's balance sheet and income statement appear below:

Comparative Balance Sheet
Assets:	Ending Balance	Beginning Balance
Cash and cash equivalents	$ 36	$ 33
Accounts receivable	46	41
Inventory	53	59
Plant and equipment	472	460
Accumulated depreciation	( 218)	( 214)
Total assets	$389	$379
Liabilities and stockholders' equity:
Accounts payable	$ 52	$ 62
Long-term debt	289	330
Common stock	84	80
Retained earnings	(  36)	(  93)
Total liabilities and stockholders' equity	$389	$379

Income Statement
Sales	$737
Cost of goods sold	454
Gross margin	283
Selling and administrative expense	173
Net operating income	110
Income taxes	33
Net income	$ 77

Cash dividends were $20.

Prepare a statement of cash flows in good form using the indirect method.