The equity method of accounting for investments in voting common stock is appropriate when:

On January 1, 2021, Worth Co. issued at par $2,000,000 of 5% convertible bonds. Each $1,000 bond is convertible into 10 shares of common stock. No bonds were converted during 2021. Worth had 200,000 shares of common stock outstanding during 2021. Worth’s 2021 net income was $900,000 and the income tax rate was 30%. Worth’s diluted earnings per share for 2021 would be (rounded to the nearest penny):

If a company offers additional considerations to convertible bondholders in order to encourage conversion, it is called a(an): 

On January 1, 2021, Gridley Corporation had 375,000 shares of its $2 par value common stock outstanding. On March 1, Gridley sold an additional 750,000 shares on the open market at $20 per share. Gridley issued a 20% stock dividend on May 1. On August 1, Gridley purchased 420,000 shares of treasury stock. On November 1, 600,000 shares were sold for $25 per share. What is the weighted-average number of shares outstanding for 2021?

On May 1, 2021, Payne Co. issued $1,500,000 of 7% bonds at 103, which are due on April 30, 2031. Twenty detachable stock warrants entitling the holder to purchase for $40 one share of Payne’s common stock, $15 par value, were attached to each $1,000 bond. The bonds without the warrants would sell at 96. On May 1, 2021, the fair value of Payne’s common stock was $35 per share and of the warrants was $2. On May 1, 2021, Payne should record the bonds with a

On January 1, 2021, Ellison Company granted Sam Wine, an employee, an option to buy 1,000 shares of Ellison Co. stock for $30 per share, the option exercisable for 5 years from date of grant. Using a fair value option pricing model, total compensation expense is determined to be $6,000. Wine exercised his option on October 1, 2021 and sold his 1,000 shares on December 1, 2021. Quoted market prices of Ellison Co. stock in 2021 were: July 1   $30 per share October 1   $36 per share December 1  $40 per share The service period is for three years beginning January 1, 2021. As a result of the option granted to Wine, Ellison should recognize compensation expense for 2021 on its books in the amount of

On March 1, 2021, Ruiz Corporation issued $2,000,000 of 8% nonconvertible bonds at 104, which are due on February 28, 2041. In addition, each $1,000 bond was issued with 25 detachable stock warrants, each of which entitled the bondholder to purchase for $50 one share of Ruiz common stock, par value $25. The bonds without the warrants would normally sell at 95. On March 1, 2021, the fair value of Ruiz’s common stock was $40 per share and the fair value of the warrants was $2.00. What amount should Ruiz record on March 1, 2021 as paid-in capital from stock warrants?

Sox Corporation purchased a 40% interest in Hack Corporation for $1,500,000 on January 1, 20X8. On November 1, 20X8, Hack declared and paid $1 million in dividends. On December 31, Hack reported a net loss of $6 million for the year. How would Sox’s reported net income be impacted in 20X8 because of its investment in Hack?

Milo Co. had 800,000 shares of common stock outstanding on January 1, issued 126,000 shares on May 1, purchased 63,000 shares of treasury stock on September 1, and issued 54,000 shares on November 1. The weighted average shares outstanding for the year is

Fogel Co. has $4,000,000 of 8% convertible bonds outstanding. Each $1,000 bond is convertible into 30 shares of $30 par value common stock. The bonds pay interest on January 31 and July 31. On July 31, 2021, the holders of $1,280,000 bonds exercised the conversion privilege. On that date the market price of the bonds was 105 and the market price of the common stock was $36. The total unamortized bond premium at the date of conversion was $280,000. Fogel should record, as a result of this conversion, a