XYZ, INC. had net income of $10 million for the year.

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
Ending
Beginning
Assets:
Balance
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.