On January 1, 2014, Gottlieb Corporation issued $4,360,000 of 10-year, 8% convertible debentures at 104. Interest is to be paid semiannually on June 30 and December 31. Each $1,000 debenture can be converted into 9 shares of Gottlieb Corporation $104 par value common stock after December 31, 2015. On January 1, 2016, $436,000 of debentures are converted into common stock, which is then selling at $116. An additional $436,000 of debentures are converted on March 31, 2016. The market price of the common stock is then $119. Accrued interest at March 31 will be paid on the next interest date. Bond premium is amortized on a straight-line basis. Make the necessary journal entries for: (a) December 31, 2015. (c) March 31, 2016. (b) January 1, 2016. (d) June 30, 2016. Record the conversions using the book value method. (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. Round answers to 0 decimal places, e.g. 5,275.) No. Date Account Titles and Explanation Debit Credit (a) Dec. 31, 2015 (b) Jan. 1, 2016 (c) Mar. 31, 2016 (To record interest expense) Mar. 31, 2016 (To record the conversion) (d) Jun. 30, 2016 Exercise 16-7 Illiad Inc. has decided to raise additional capital by issuing $176,800 face value of bonds with a coupon rate of 11%. In discussions with investment bankers, it was determined that to help the sale of the bonds, detachable stock warrants should be issued at the rate of one warrant for each $100 bond sold. The value of the bonds without the warrants is considered to be $148,320, and the value of the warrants in the market is $16,480. The bonds sold in the market at issuance for $162,000. (a) What entry should be made at the time of the issuance of the bonds and warrants? (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.) Account Titles and Explanation Debit Credit (b) Prepare the entry if the warrants were nondetachable. (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.) Account Titles and Explanation Debit Credit Exercise 16-10 On November 1, 2014, Olympic Company adopted a stock-option plan that granted options to key executives to purchase 66,500 shares of the company’s $13 par value common stock. The options were granted on January 2, 2015, and were exercisable 2 years after the date of grant if the grantee was still an employee of the company. The options expired 6 years from date of grant. The option price was set at $50, and the fair value option-pricing model determines the total comp.

1. On January 1, 2014, Gottlieb Corporation issued $4,360,000 of
10-year, 8% convertible debentures at 104. Interest is to be paid
semiannually on June 30 and December 31. Each
$1,000 debenture can be converted into 9 shares of Gottlieb
Corporation $104 par value common stock after December 31,
2015.
On January 1, 2016, $436,000 of debentures are converted into
common stock, which is then selling at $116. An additional
$436,000 of debentures are converted on March 31, 2016. The
market price of the common stock is then $119. Accrued
interest at March 31 will be paid on the next interest date.
Bond premium is amortized on a straight-line basis.
Make the necessary journal entries for:
(a)
December 31, 2015.
(c)
March 31, 2016.
(b)
January 1, 2016.
(d)
June 30, 2016.
Record the conversions using the book value method. (Credit
account titles are automatically indented when amount is

2. entered. Do not indent manually. If no entry is required, select
"No Entry" for the account titles and enter 0 for the amounts.
Round answers to 0 decimal places, e.g. 5,275.)
No.
Date
Account Titles and Explanation
Debit
Credit
(a)
Dec. 31, 2015
(b)
Jan. 1, 2016

3. (c)
Mar. 31, 2016
(To record interest expense)
Mar. 31, 2016

4. (To record the conversion)
(d)
Jun. 30, 2016

5. Exercise 16-7
Illiad Inc. has decided to raise additional capital by issuing
$176,800 face value of bonds with a coupon rate of 11%. In
discussions with investment bankers, it was determined that to
help the sale of the bonds, detachable stock warrants should be
issued at the rate of one warrant for each $100 bond sold. The
value of the bonds without the warrants is considered to be
$148,320, and the value of the warrants in the market is
$16,480. The bonds sold in the market at issuance for $162,000.
(a) What entry should be made at the time of the issuance of the
bonds and warrants? (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.)
Account Titles and Explanation
Debit
Credit
(b) Prepare the entry if the warrants were
nondetachable. (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

6. the amounts.)
Account Titles and Explanation
Debit
Credit
Exercise 16-10
On November 1, 2014, Olympic Company adopted a stock-
option plan that granted options to key executives to
purchase 66,500 shares of the company’s $13 par value common
stock. The options were granted on January 2, 2015, and were
exercisable 2 years after the date of grant if the grantee was still
an employee of the company. The options expired 6 years from
date of grant. The option price was set at $50, and the fair value
option-pricing model determines the total compensation expense
to be $712,500.
All of the options were exercised during the year
2017: 49,875 on January 3 when the market price was $67,
and 16,625 on May 1 when the market price was $78 a share.
Prepare journal entries relating to the stock-option plan for the
years 2015, 2016, and 2017. Assume that the employee performs
services equally in 2015 and 2016. (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

7. Account Titles and Explanation
Debit
Credit
1/2/15
12/31/15
12/31/16
1/3/17

8. 5/1/17
Exercise 16-13
Derrick Company issues 4,760 shares of restricted stock to its
CFO, Dane Yaping, on January 1, 2014. The stock has a fair
value of $124,100 on this date. The service period related to
this restricted stock is 4 years. Vesting occurs if Yaping stays
with the company for 4 years. The par value of the stock is $4.
At December 31, 2015, the fair value of the stock is $148,100.
(a) Prepare the journal entries to record the restricted stock on
January 1, 2014 (the date of grant), and December 31,
2015. (Credit account titles are automatically indented when
amount is entered. Do not indent manually. If no entry is

9. required, select "No Entry" for the account titles and enter 0 for
the amounts.)
Date
Account Titles and Explanation
Debit
Credit
1/1/14
12/31/15
(b) On March 4, 2016, Yaping leaves the company. Prepare the
journal entry to account for this forfeiture. (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
3/4/16

10. Click if you would like to Show Work for this question:
Open Show Work
Exercise 16-15 (Part Level Submission)
Newton Inc. uses a calendar year for financial reporting. The
company is authorized to issue 9,053,000 shares of $12 par
common stock. At no time has Newton issued any potentially
dilutive securities. Listed below is a summary of Newton’s
common stock activities.
1.
Number of common shares issued and outstanding at December
31, 2012
2,507,000
2.
Shares issued as a result of a 12% stock dividend on September
30, 2013
300,840

11. 3.
Shares issued for cash on March 31, 2014
2,148,000
Number of common shares issued and outstanding at December
31, 2014
4,955,840
4.
A 2-for-1 stock split of Newton’s common stock took place on
March 31, 2015
(a)
Compute the weighted-average number of common shares used
in computing earnings per common share for 2013 on the 2014
comparative income statement.
shares

12. Exercise 16-20
On January 1, 2014, Lennon Industries had stock outstanding as
follows.
6% Cumulative preferred stock, $105 par value, issued and
outstanding 11,000 shares
$1,155,000
Common stock, $11 par value, issued
and outstanding 288,000 shares
3,168,000
To acquire the net assets of three smaller companies, Lennon
authorized the issuance of an additional 196,800 common
shares. The acquisitions took place as shown below.
Date of Acquisition
Shares Issued
Company A April 1, 2014
76,800
Company B July 1, 2014
94,800
Company C October 1, 2014
25,200
On May 14, 2014, Lennon realized a $108,000 (before taxes)
insurance gain on the expropriation of investments originally
purchased in 2000.
On December 31, 2014, Lennon recorded net income of

13. $408,000 before tax and exclusive of the gain.
Assuming a 49% tax rate, compute the earnings per share data
that should appear on the financial statements of Lennon
Industries as of December 31, 2014. Assume that the
expropriation is extraordinary. (Round answer to 2 decimal
places, e.g. $2.55.)
Lennon Industries
Income Statement
For the year ended December 31, 2014
$
$
Exercise 16-25
On January 1, 2014, Crocker Company issued 10-year,
$3,302,000 face value, 6% bonds, at par. Each $1,000 bond is
convertible into 24 shares of Crocker common stock. Crocker’s
net income in 2014 was $297,000, and its tax rate was 45%. The
company had 110,000 shares of common stock outstanding
throughout 2014. None of the bonds were converted in 2014.
(a) Compute diluted earnings per share for 2014. (Round answer
to 2 decimal places, e.g. $2.55.)
Diluted earnings per share
$
(b) Compute diluted earnings per share for 2014, assuming the
same facts as above, except that $1,100,000 of 6% convertible
preferred stock was issued instead of the bonds. Each $100

14. preferred share is convertible into 5 shares of Crocker common
stock. (Round answer to 2 decimal places, e.g. $2.55.)
Diluted earnings per share
$
Exercise 16-29
On December 31, 2010, Beckford Company
issues 128,000 stock-appreciation rights to its officers entitling
them to receive cash for the difference between the market price
of its stock and a pre-established price of $10. The fair value of
the SARs is estimated to be $5 per SAR on December 31, 2011;
$2 on December 31, 2012; $11 on December 31, 2013; and
$10 on December 31, 2014. The service period is 4 years, and
the exercise period is 7 years.
(a) Prepare a schedule that shows the amount of compensation
expense allocable to each year affected by the stock-
appreciation rights plan. (If the compensation decreases from
prior year enter the amount as a negative number in the table
e.g. -25,000 or (25,000).)
Date
Fair Value
Cumulative Compensation Recognizable
PercentageAccrued
CompensationAccrued to Date
Expense2011
Expense2012
Expense2013

15. Expense2014
12/31/11
$
$
%
$
$
$
$
$

16. 12/31/12
%

17. 12/31/13
%

18. 12/31/14
%
$
(b) Prepare the entry at December 31, 2014, to record
compensation expense, if any, in 2014. (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.)
Account Titles and Explanation
Debit
Credit
(c) Prepare the entry on December 31, 2014, assuming that all
128,000 SARs are exercised. (Credit account titles are

19. 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.)
Account Titles and Explanation
Debit
Credit