Reference no: EM132478488

The partial balance sheet of NG Co. reflected the following 2025 year end:

Bond Payable -                                                                    $500,000 par value, 7% maturing

December 31, 2034                                                              $450,000

Preferred Shares - $2, No par value Cumulative, Convertible at 1

Preferred shares for 2 common shares - 14, 000 outstanding        210,000

Contributed Capital - Common Shares Options Outstanding           70,000

Common Stock Conversion Rights - 7% Bonds                             30,000

Common Share - No Par Value 320,000 Share Outstanding            800,000

Additional Info

Point 1) There are no dividends in arrears at the beginning of the year. No dividend have been declares for 2025

Point 2) Net income for 2025 is $1,263,000, includes $ 38,000 interest expense for the 7% bonds.

Point 3) Income tax rate is 40%

Point 4) Bonds, options and preferred shares were outstanding for the entire year.

Point 5) The stock options are noncompensatory and are convertible into a total of 80,000 common shares at an exercise price of $32,30. The average share price during the year was $34.

Point 6) No other common share transactions occurred during the year

Point 7) Each $1,000 bond is convertible into 30 shares of common stock

Required:

Question 1: Calculate basic and diluted EPS for year ended December 31, 2025

Question 2: Assume that one half of the stock options were exercised on January 1, 2025. Prepare the journal entry to record the exercise of the stock option.