Homework 1, Fall 15, 311, Kim

1. Prepare journal entries for Strauss Company for the following

events and transactions. Strausss shares have par value $1.
If no journal entry is needed, write no journal entry.

A. Is the estimated cost of manufacturers warranties recorded as

an expense at the time of sale? Why or why not?

B. On 4/8/15 Strauss purchased 20,000 shares of treasury common

stock for $840,000 and sold them on 6/22/15 for $827,000. Prepare
the journal entries related to these transactions.

C. In December 2015 Strauss declared and distributed property

dividends by distributing 4,000,000 shares of Atlas Company
common stock which had a book value of $42M as Investments but
had a fair value of $38M. Journalize the transaction.

D. Strauss issued $2M, 4%, 5-year bonds convertible to 50,000

common shares on 10/25/14 at 102. On 11/25/15 all the convertible
bonds were converted when the premium was $36,000 and the share
price was $42. Prepare entries for 10/25/14 and 11/25/15.

E. On 7/1/15 Strauss issued $2M, 10year, 3% bonds at 97. The

bonds were issued with 20,000 detachable stock warrants with
strikeprice$41.Atthattime,thestockpriceofStrausswas
$41,thepriceofbondswithoutstockwarrantswas95,andthe
price of similar stock warrants was unknown. Journalize the
issuanceofthebondswithstockwarrants.

F.On1/1/15Straussgranted100,000commonsharestoexecutives
withthevestingdate12/31/16.Thestockpriceatthegrantdate
was$40.60.Prepareentriesfor1/1/15,12/31/15,and12/31/16.

2.Forthefiscalyear2015GroveCompanyhad$513.5Mnetincome
and paid$16M aspreferreddividends.Thetaxratewas 40%.The
followingistheinformationabout thechangesin thenumberof
commonsharesduring2015.
1/1
3/1
5/1
9/1
11/1

Thenumberofcommonsharesoutstandingwas68M
Purchased4Mtreasuryshares
2:1stocksplit
Issued10Mcommonshares
50%stockdividend

At12/31/15Grovehadthefollowingsecuritiesoutstanding:
1) 10M Preferred shares convertible to 8M common shares after
10/1/17 issuedon 10/1/15.Atotalof$4.9M dividendswerepaid
tothesepreferredsharesduring2015.
2)$150M, 4%, 5yearbonds, issuedat par on 7/1/12 andcanbe
convertedto5Mcommonsharesafter7/1/15.
3)Stockoptionstopurchase6Mcommonshareswithexerciseprice
$31, which were issued on 2/1/10 and can be exercised after
2/1/15.Theaveragestockpriceduring2015was$30pershare.
4) Stock options to purchase 15M common shares with exercise
price$28,whichwereissuedon4/1/15andcanbeexercisedafter
4/1/17.
Computethetwo2015EPSnumbersforGrove.