Reference no: EM132642449
Anchor, Inc. had income after taxes of $500,000 for the current year. An average of 125,000 shares of Anchor's common stock was outstanding for the entire year, and 130,000 shares were outstanding at year-end. In addition, options were outstanding throughout the year to buy 12,000 shares of Anchor common stock at $7.50 per share.
During the year, Anchor's common stock had an average market price of $9 per share. The stock was selling for $10 per share at year-end. Anchor is subject to a 34 percent tax rate and amortizes its bonds using a straight-line method. Anchor had the following convertible securities out standing throughout the current year:
1. 6%, cumulative, convertible preferred stock. Each $10 par value share is convertible into 1.5 common shares. A total of $100,000 par value is outstanding.
2. 8 percent, 10-year, $1,000 par convertible bonds that were issued at 105. Total par value outstanding is $100,000. Each bond converts into 90 shares of common stock.
3. 13 percent, 5-year, $1,000 par convertible bonds that were issued at 97. Total par value outstanding is $30,000. Each bond converts into 30 shares of common stock.
4. 7 percent, 8-year, $1,000 par convertible bonds that were issued at 95. Total par value outstanding is $60,000. Each bond converts into 20 shares of common stock.
5. An 11%, 20-year, $1,000 par convertible bonds that were issued at face value. The total par value outstanding is $500,000. Each bond converts into 20 shares of common stock.
Problem 1: Prepare the general entry for Anchor, Inc
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: Prepare the general entry for Anchor, Inc. During the year, Anchor's common stock had an average market price of $9 per share.
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