Exam 18: Earnings Per Share

When a company with a complex capital structure has a loss from continuing operations and potentially dilutive securities, the calculation of earning per share (EPS) results in

The Thomas Company's net income for the year ended December 31 was $30,000. During the year, Thomas declared and paid $3,000 in cash dividends on preferred stock and $5,250 in cash dividends on common stock. At December 31, 36,000 shares of common stock were outstanding, 30,000 of which had been issued and outstanding throughout the year and 6,000 of which were issued on July 1. There were no other common stock transactions during the year, and there is no potential dilution of earnings per share. What should be the year's basic earnings per common share of Thomas, rounded to the nearest penny?

At December 31, 2010, Benjamin Company had 700 shares of common stock outstanding. On September 1, 2011, an additional 300 shares of common stock were issued. In addition, Benjamin had $20,000 of 8 percent convertible bonds outstanding at December 31, 2010, which are convertible into 400 shares of common stock. No bonds were converted into common stock in 2011. Net income for the year ended December 31,2011, was $6,000. Assuming an income tax rate of 50 percent what would be the company's diluted earnings per share for the year ended December 31, 2011?

Landrover, Inc. had 150,000 shares of common stock issued and outstanding at December 31, 2010. On July 1, 2011, an additional 25,000 shares of common stock were issued for cash. Landrover also had unexercised stock options to purchase 20,000 shares of common stock at $15 per share outstanding at the beginning and end of 2011. The market price of Landrover's common stock was $20 throughout 2011. What number of shares should be used in computing diluted earnings per share for the year ended December 31, 2011?

Where in the financial statements should basic and complex EPS figures for income from continuing operations be reported?

During all of 2011 Dawson Manufacturing Company had 950,000 shares of common stock outstanding. On June 30, 2011, the company issued 10,000 7 percent convertible bonds at par. The maturity value of each bond is $1,000. Each bond is convertible into 20 shares of common stock. None were converted during 2011. Dawson also had 60,000 stock warrants outstanding for all of 2011. The option price is $10 per share. The market price of the common stock was $40 on December 31, 2011, and the average market price for 2011 was $30. Dawson reported a net income of $3,650,000 for 2011. Assume the company had a 40 percent income tax rate.

At December 31, 2010, Dayplanner Inc. had 250,000 shares of common stock outstanding. On October 1, 2011, an additional 60,000 shares of common stock were issued for cash. Dayplanner also had 2,000,000 of 8 percent convertible bonds outstanding at December 31, 2011, which are convertible into 50,000 shares of common stock. The bonds are dilutive in the 2011 earnings per share computation. No bonds were issued or converted into common stock during 2011. What is the number of shares that should be used in computing diluted earnings per share for the year ended December 31, 2011?

What is the correct treatment of a stock dividend issued in mid-year when computing the weighted-average number of common shares outstanding for earnings per share purposes?

In computing the earnings per share of common stock, noncumulative preferred dividends not declared should be

During its fiscal year, Richards' Distributing had net income of $100,000 (no extraordinary items) and 50,000 shares of common stock and 10,000 shares of preferred stock outstanding. Richards declared and paid dividends of $.50 per share to common and $6.00 per share to preferred. The preferred stock is convertible into common stock on a share-for-share basis. For the year, Richards Distributing should report diluted earnings (loss) per share of

Basic earnings per share represents the amount of earnings attributable to

Shoemaker Company had 1,000 common shares issued and outstanding at January 1. During the year, Shoemaker also had the common stock transactions listed below. Given this information, what is the weighted-average number of shares that Shoemaker should use for earnings per share purposes?

At December 31, 2010, Lefton, Inc. had 600,000 shares of common stock outstanding. On April 1, 2011, an additional 180,000 shares of common stock were issued for cash. Lefton also had $5,000,000 of 8% convertible bonds outstanding at December 31, 2010, which are convertible into 150,000 shares of common stock. The bonds are dilutive in the 2011 EPS computation. No bonds were issued or converted into common stock during 2011. Using the information above, what is the number of shares that should be used in computing basic earnings per share for 2011?

If convertible bonds are dilutive, the interest expense added back to the numerator in calculating diluted earnings per share is

Which combination is the correct statement regarding disclosure requirements for earnings per share?

An entity that reports a discontinued operation or an extraordinary item shall present basic and diluted earnings per share amounts for those line items

In calculating earning per share, stock options warrants, and rights are

The price-earnings ratio frequently is used by analysts and investors for evaluating stock prices because it relates the earnings of the business to the current market price of the stock. The ratio is computed by dividing the market price per share by the earnings per share before extraordinary items. Explain how the price-earnings ratio should be interpreted, including any problems associated with the interpretation of the ratio.

At December 31, 2010, Lefton, Inc. had 600,000 shares of common stock outstanding. On April 1, 2011, an additional 180,000 shares of common stock were issued for cash. Lefton also had $5,000,000 of 8% convertible bonds outstanding at December 31, 2010, which are convertible into 150,000 shares of common stock. The bonds are dilutive in the 2011 EPS computation. No bonds were issued or converted into common stock during 2011. Using the information above, what is the number of shares that should be used in computing diluted earnings per share for 2011?

At December 31, 2010, General Corporation had 400 shares of common stock outstanding. On October 1, 2011, an additional 100 shares of common stock were issued. In addition, General Corp. had $40,000 of 8 percent convertible bonds outstanding at December 31, 2010, which are convertible into 225 shares of common stock. No bonds were converted into common stock in 2011. Net income for the year ending December 31, 2011, was $14,000. Assuming the income tax rate was 50 percent, the diluted earnings per share for the year ended December 31, 2011, should be