Exam 18: Earnings Per Share

At December 31, 2011, the Murdock Company had 150,000 shares of common stock issued and outstanding. On April 1, 2012, an additional 30,000 shares of common stock were issued. Murdock's net income for the year ended December 31, 2012, was $517,500. During 2012, Murdock declared and paid $300,000 in cash dividends on its nonconvertible preferred stock. The basic earnings per common share, rounded to the nearest penny, for the year ended December 31, 2012, should be

A company earned $20,000 in 2011 and had 20,000 shares of common stock outstanding the entire year. The following four potentially dilutive securities were also outstanding for the entire year. The numerator and denominator effects of the issues are as indicated: What is diluted EPS?

Earnings per share disclosures are required only for

Andrews Corporation began business on January 1, 2011. Due to difficulties in beginning operations, the company issued 30 shares of common stock (par $10) on January 1, 2011, to the organizers. Fifteen additional shares were also sold on that date. The following also occurred during the year 2011: The weighted average number of shares outstanding for 2011 was

At December 31, 2011 and 2010, Lapham Corp. had 200,000 shares of common stock and 20,000 shares of 5 percent, $100 par value cumulative preferred stock outstanding. No dividends were declared on either the preferred or common stock in 2010 or 2011. Net income for 2011 was $1,000,000. For 2011, basic earnings per common share amounted to

The following information applies to the next three questions: James Corporation currently has stock rights outstanding for 2,000 common shares. The exercise price of these shares is $20. The options were issued in January of 2009. The average market price of the related common stock during the year 2009 was $25. The average market price of the related common stock during 2010 was $21 and during 2011 was $19. The company's fiscal year ends on December 31 of each year. How should these stock rights be treated in earnings per share calculations for the year ending December 31, 2009?

Glendale Enterprises had 200,000 shares of common stock issued and outstanding at December 31, 2010. On July 1, 2011, Glendale issued a 10 percent stock dividend. Unexercised stock options to purchase 40,000 shares of common stock (adjusted for the 2011 stock dividend) at $20 per share were outstanding at the beginning and end of 2011. The market price of Glendale's common stock (which was not affected by the stock dividend) was $25 per share during 2011. Net income for the year ended December 31, 2011, was $1,100,000. What should be Glendale's 2011 diluted earnings per common share, rounded to the nearest penny?

Under current GAAP, a company with a complex capital structure and potential earnings per share dilution must present

The 2011 net income of Atwater Inc. was $200,000 and 100,000 shares of its common stock were outstanding during the entire year. In addition, there were outstanding options to purchase 10,000 shares of common stock at $10 per share. These options were granted in 2008 and none had been exercised by December 31, 2011. Market prices of Atwater's common stock during 2011 were The amount that should be shown as Atwater's diluted earnings per share for 2011 (rounded to the nearest cent) is

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

You are an independent CPA and have just acquired a new client, A. Dunn Manufacturing Company. The president of the company recently read an article advising a firm's management team to seek to maximize the long-run value of the firm's stock. The article mentioned profit maximization, earnings per share, and the role of these two factors in stock price maximization. The president wants your advice on how the choice of inventory cost flow methods (e.g., FIFO vs. LIFO) relates to profit maximization, earnings per share, and stock price maximization.

In calculating diluted earnings per share, which of the following should not be considered?

A company already has calculated its basic earnings per share (EPS). In determining diluted earnings per share, the annual dividend on convertible cumulative preferred stock which is dilutive should be

For purposes of computing the weighted-average number of shares outstanding during the year, a midyear event that must be treated as occurring at the beginning of the year is the

During 2011, the Ellis Corporation had 370,000 shares of $20 par common stock outstanding. On January 1, 2011, 2,000, 8 percent bonds were issued with a maturity value of $1,000 each. To enhance the bond sale, the company offered a conversion of 50 shares of common stock for each bond at the option of the purchaser. Net income for 2011 was $464,000. The income tax rate was 30 percent. Compute the diluted earnings per share of common stock.

Of the following, select the incorrect statement concerning earnings per share.

Bay Area Supplies had 60,000 shares of common stock outstanding at January 1. On May 1, Bay Areas Supplies issued 31,500 shares of common stock. Outstanding all year were 30,000 shares of nonconvertible preferred stock on which a dividend of $4 per share was paid in December. Net income for the year was $290,100. Bay Area Supplies should report basic earnings per share for the year of

Franklin Company had 100 shares of common stock issued and outstanding at December 31, 2010. On July 1, 2011, Ferris issued a 10 percent stock dividend. Unexercised stock options to purchase 20 shares of common stock (adjusted for the 2011 stock dividend) at $20 per share were outstanding at the beginning and end of 2011. The average market price of Franklin's common stock (which was not affected by the stock dividend) was $25 per share during 2011. The ending market price was $40. Net income for the year ended December 31, 2011, was $2,200. What was Franklin's 2011 diluted earnings per share, rounded to the nearest cent?

The following information applies to the next three questions: James Corporation currently has stock rights outstanding for 2,000 common shares. The exercise price of these shares is $20. The options were issued in January of 2009. The average market price of the related common stock during the year 2009 was $25. The average market price of the related common stock during 2010 was $21 and during 2011 was $19. The company's fiscal year ends on December 31 of each year. How should these stock rights be treated in the earnings per share calculation for the year ending December 31, 2010?

Which of the following is correct regarding earnings per share (EPS)?