Prepare a statement of cash flows in good form

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Assignment

1. XYZ, INC. had net income of $10 million for the year. It had outstanding 1 million common stock shares until September 30th when it issued another 500,000 shares (1,500,000 at year-end). XYZ also had 50,000 preferred shares that paid a $4 annual dividend. The preferred stock was convertible into common stock at the rate of 2 common shares for each preferred share.

a. Calculate the company's basic AND fully diluted earnings per share

2. a. Describe the basic accounting treatment for Stock Options and explain how and why companies might use them.
b. Locate a major company that issued stock options in the recent past. Provide a link or upload the financial statements (notes) for the company. What was the major reason the company issued the options? Do you believe the accounting treatment is reasonable?

3. Garcia Corporation's balance sheet and income statement appear below:

Comparative Balance Sheet

Assets:

Ending Balance

Beginning Balance

Cash and cash equivalents     

$ 36

$ 33

Accounts receivable   

46

41

Inventory       

53

59

Plant and equipment  

472

460

Accumulated depreciation     

( 218)

( 214)

Total assets     

$389

$379

Liabilities and stockholders' equity:

 

 

Accounts payable       

$ 52

$ 62

Long-term debt          

289

330

Common stock           

84

80

Retained earnings      

(  36)

(  93)

Total liabilities and stockholders' equity

$389

$379


Income Statement

Sales   

$737

Cost of goods sold     

454

Gross margin  

283

Selling and administrative expense

173

Net operating income 

110

Income taxes  

33

Net income     

$ 77

Cash dividends were $20.

Prepare a statement of cash flows in good form using the indirect method.

Reference no: EM131790891

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