Exam 20: Earnings Per Share

The order for antidilutive sequencing is ranking the least dilutive security first, ascending to the most dilutive security last.

Which one of the following items is not a way for management to influence EPS computations to meet target goals?

Retroactive application of stock splits and stock dividends to the weighted-average number of common shares makes EPS comparable for prior and current periods of one entity.

A company may show EPS information either on the Income Statement or in the Notes to Financial Statements, whichever it prefers.

When computing diluted EPS, convertible preferred stock issued during the year are treated as if they were issued on the first day of the year.

The numerator for basic EPS is net income less preferred dividend requirements.

When applying the if-converted assumption, the company assumes conversion at the beginning of the year for a convertible bond or convertible preferred stock outstanding at the beginning of the year.

Stock options and warrants differ from convertible debt and convertible preferred stock in that they generally provide cash to the issuing entity.

Edwards Corporation has three potentially dilutive securities. Computation of the antidilution sequencing recorded the following: Security Increase in Income Increase in Common Shares Convertible Preferred Stock \ 50,000 16,000 Stock Warrants \ 0 7,000 Convertible Bonds \ 20,000 6,000 What is the correct order of entry into the EPS computation? (Round any calculations to the nearest cent.)

When options and warrants are in the money, they will be dilutive.

The income statement requires presentation of basic and diluted earnings per share for each year presented, plus additional information to be disclosed in the notes to the financial statements for all years presented.

Terrell Foods reported $950,000 in net income and its weighted average shares outstanding for the year is 200,000 shares. In prior years it sold $1,000,000 of 8% long-term convertible bonds at par which are still outstanding. The bonds are convertible into 20,000 shares of common stock. The tax rate for all years is 40%. If Terrell has no other potentially dilutive securities and no preferred stock, and no conversions occur during the year, what are basic and diluted EPS? (Round your final answers to the nearest cent.)

Terrell Foods reported $870,000 in net income and its weighted average shares outstanding for the year is 200,000 shares. In prior years it sold $1,500,000 of 8% long-term convertible bonds at par which are still outstanding. The bonds are convertible into 10,000 shares of common stock. The tax rate for all years is 40%. If Terrell has no other potentially dilutive securities and no preferred stock, and no conversions occur during the year, what are basic and diluted EPS? (Round your final answers to the nearest cent.)

Lewis, Inc. began the year with 300,000 shares of common stock and 25,000 shares of 6%, $100 par value, cumulative, convertible preferred stock. Each share of preferred stock is convertible into 2 shares of common stock. On June 30, it purchased 10,000 shares of treasury stock. On November 1, Lewis declared a 2 for 1 stock split. Net income for the year was $850,000. Compute weighted average shares of common stock for the year, basic EPS, and diluted EPS.

Hornet Motors reported $535,000 net income for the current year. Beginning common shares outstanding were 110,000. Hudson also had 10,000, 6% nonconvertible, cumulative, $100 par value preferred shares outstanding for the entire year. No cash dividends were declared but Hornet did declare and distribute a 10% stock dividend on common shares on July 1. Compute basic earnings per share. (Round your answer to the nearest cent.)

When a company has a net loss from continuing operations, it should include ________.

Which one of the following does not require the computation of diluted earnings per share?

Gray Corporation reported $500,000 in interest expense for the current year for bonds that were issued in prior years. Gray's tax rate is 40%. By what amount is the numerator of diluted EPS positively adjusted?

Terrell Foods reported $820,000 in net income (not considering interest expense) and its weighted-average shares outstanding for the year is 200,000 shares. In prior years it sold $1,000,000 of 8% long-term convertible bonds at par which are still outstanding at the start of the year. The bonds are convertible into 40,000 shares of common stock. The tax rate for all years is 40%. Bondholders convert the bonds on July 1 of the current year. If Terrell has no other potentially dilutive securities and no preferred stock, what is the numerator for basic and diluted EPS? (Round your final answers to the nearest cent.)

Potentially dilutive securities should not be included in dilutive EPS computations when net income from continuing operations is negative.