Wilbourne Corporation issues $250,000 of 10% preferred stock to investors who pay cash for the shares. Suppose the preferred shares are issued with a mandatory redemption feature that requires Wilbourne to buy back the stock in five years for $250,000. Should the instrument be classified as preferred stock? Justify your answer
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Wilbourne Corporation issues $250,000 of 10% preferred stock to investors who pay cash for the shares. Suppose the
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- Olde Corporation provides an executive stock option plan. Under the plan, the company granted options on January 1, 2024, that permit executives to acquire 2.5 million of the company's $1 par value common shares within the next five years, but not before December 31, 2025 (the vesting date). The exercise price is the market price of the shares on the date of the grant, $13 per share. The fair value of the options, estimated by an appropriate option pricing model, is $2 per option. No forfeitures are anticipated Ignore taxes. Required: 1. Determine the total compensation cost pertaining to the options, assuming the fair value approach has been selected. 2. & 4. Prepare the appropriate journal entries (if any). Complete this question by entering your answers in the tabs below. Req 1 Reg 2 to 4 Determine the total compensation cost pertaining to the options, assuming the fair value approach has been selected. Note: Enter your answer in millions rounded to 2 decimal places (i.e., 5,500,000…Olde Corporation provides an executive stock option plan. Under the plan, the company granted options on January 1, 2024, that permit executives to acquire 3.9 million of the company's $1 par value common shares within the next five years, but not before December 31, 2025 (the vesting date). The exercise price is the market price of the shares on the date of the grant, $14 per share. The fair value of the options, estimated by an appropriate option pricing model, is $4 per option. No forfeitures are anticipated. Ignore taxes. Required: 1. Determine the total compensation cost pertaining to the options, assuming the fair value approach has been selected. 2. & 4. Prepare the appropriate journal entries (if any).A hypothetical investor purchased 200 shares of Amazing Corp. common stock at a per share price of $30.00 on July 2, 2020. The same investor then sold 100 shares of the investment, on Sept. 3, 2020 at $19.00 per share. The same investor subsequently sold the remaining 100 shares of the initial investment, for $57.00 per share on April 7, 2021. All of the transactions were executed through the same broker that charged a 1% commission on the value of each of the trades. Find the (Show your Calculations):a) Total amount of commissions the investor paid on all of the transactions? b) Proceeds on all of the transactions?c) Amount of profit (or loss) made by the investor on the entire transaction?
- Four years ago, Quantum Computer Services issued convertible preferred stock with a par value of $60 and a stated dividend of 5 percent. Each share of preferred stock can be converted to three shares of common stock at the option of the investor. When issued, the preferred stock was sold at par value such that Quantum raised $3.6 million to fund expansion for its operations. What is the conversion price of the preferred stock? When should an investor consider converting into common stock? (Ignore taxes and other costs that might be associated with conversion).During 2020, Empresas ABC issued 4,000 preferred shares with a par value of $ 10 to $ 11 each. Each preferred share can be exchanged at the option of the holder (investor) for three common shares of ABC with a par value of $ 1. In August 2021, all preferred shares were exchanged. At that time the market value of the common stock was $ 5 per share. What amount must ABC credit to the Capital account contributed in excess of the value for common shares? a. $32,000 b. $48,000 c. 0 d. $44,000The treasurer of Miller Co. has read on the Internet that the stock price of Wade Inc. is about to take off. In order to profit from this potential development, Miller Co. purchased a call option on Wade common shares on July 7, 2020, for $240. The call option is for 200 shares (notional value), and the strike price is $70. (The market price of a share of Wade stock on that date is $70.) The option expires on January 31, 2021. The following data are available with respect to the call option. Date Market Price of Wade Shares Time Value of Call Option September 30, 2020 $77 per share $180 December 31, 2020 75 per share 65 January 4, 2021 76 per share 30 Instructions Prepare the journal entries for Miller Co. for the following dates. a. July 7, 2020—Investment in call option on Wade shares. b. September 30, 2020—Miller prepares financial statements. c. December 31, 2020—Miller prepares financial statements. d. January 4, 2021—Miller settles the call…
- The Cansler Corporation provides an executive stock option plan. Under the plan, the company granted options on July 1, 2015, that permit executives to acquire 15 million of the company's $3 par value common shares within the next 8 years, but not prior to June 30, 2018 (the vesting date). The exercise price is the market price of the shares on the date of the grant, $21 per share. The fair value of the options, estimated by an appropriate model, is $9.50 per option. On September 15, 2019, 10 million options are exercised to purchase 10 million shares. Prepare the necessary journal entry to record this transaction.In January 2021 you purchased 2,000 shares of BZA Ltd for $30.00 per share. Concerned that the market will turn bearish, you decide to buy 20 put options on the company’s shares with each contract written on 100 shares at an exercise (or strike) price of $30.00 expiring in July 2021 for a premium of $1.00 per share. -If at expiration the company’s share price is $28.00 calculate the total profit or loss on your hedged positionOn July 1, 2019, when its $1 par value common stock was selling for $66 per share, Kingbird Corp. issued $24,900,000 of 6% convertible debentures due in 10 years. The conversion option allowed the holder of each $1,000 bond to convert the bond into 10 shares of the corporation’s common stock. The debentures were issued for $26,394,000. The corporation believes the difference between the par value and the amount paid is attributable to the conversion feature. On January 1, 2020, the corporation’s common stock was split 2 for 1, and the conversion rate for the bonds was adjusted accordingly. On January 1, 2021, when the corporation’s $0.50 par value common stock was selling for $38 per share, holders of 9,960 of the convertible debentures exercised their conversion options. The corporation uses the straight-line method for amortizing any bond discounts or premiums.(a) Prepare in general journal form the entry to record the original issuance of the convertible debentures. (Credit account…
- An investor purchased a Convertible Note of Company XYZ for $500,000 with a $5 million valuation cap. The Convertible Note is protected against dilution from the creation of a future employee stock option pool. Company XYZ later raises $5 million in a Series A round of financing at a $20 million post-money valuation. The Series A financing terms include a provision that the company must create a stock option pool that will equal 5% of the company’s fully diluted shares after giving effect to the sale of the Series A Preferred. Company XYZ currently has 4 million shares of common stock outstanding. a) What will be the capitalization table of the Company XYZ after the Series A financing round?In 2020, Eklund, Inc., issued for $103 per share, 90,000 shares of $100 par value convertible preferred stock. One share of preferred stock can be converted into three shares of Eklund's $25 par value common stock at the option of the preferred stockholder. In August 2021, all of the preferred stock was converted into common stock. The market value of the common stock at the date of the conversion was $30 per share. What total amount should be credited to additional paid-in capital from common stock as a result of the conversion of the preferred stock into common stock? a. $2,250,000 b. $2,520,000 c. $1,170,000 d. $1,530,000Kathy Snow wishes to purchase shares of Countdown Computing, Inc. The company's board of directors has declared a cash dividend of $0.80 to be paid to holders of record on Wednesday, May 12. a. What is the last day that Kathy can purchase the stock (trade date) and still receive the dividend? b. What day does this stock begin trading ex dividend? c. What change, if any, would you expect in the price per share when the stock begins trading on the ex dividend day? d. If Kathy held the stock for less than one quarter and then sold it for $39 per share, would she achieve a higher investment return by (1) buying the stock prior to the ex dividend date at $35 per share and collecting the $0.80 dividend or (2) buying it on the ex dividend date at $34.20 per share but not receiving the dividend?