Question 1

The major difference between convertible debt and stock warrants is that upon exercise of the warrants

Accepted Answer

A)  the stock is held by the company for a defined period of time before they are issued to the warrant holder. 
B)  the holder has to pay a certain amount of cash to obtain the shares. 
C)  the stock involved is restricted and can only be sold by the recipient after a set period of time. 
D)  no paid-in capital in excess of par can be a part of the transaction. 
A)  the stock is held by the company for a defined period of time before they are issued to the warrant holder. 
B)  the holder has to pay a certain amount of cash to obtain the shares. 
C)  the stock involved is restricted and can only be sold by the recipient after a set period of time. 
D)  no paid-in capital in excess of par can be a part of the transaction.

Question 2

The recording of convertible bonds at the date of issue is the same as the recording of straight debt issues.

Accepted Answer

A) True 
 B)False

Question 3

When convertible debt is retired by the issuer, any material difference between the cash acquisition price and the carrying amount of the debt should be

Accepted Answer

A)  reflected currently in income, but not as an extraordinary item. 
B)  reflected currently in income as an extraordinary item. 
C)  treated as a prior period adjustment. 
D)  treated as an adjustment of additional paid-in capital. 
A)  reflected currently in income, but not as an extraordinary item. 
B)  reflected currently in income as an extraordinary item. 
C)  treated as a prior period adjustment. 
D)  treated as an adjustment of additional paid-in capital.

Question 4

At December 31, 2014 Pine Company had 200,000 shares of common stock and 10,000 shares of 5%, $100 par value cumulative preferred stock outstanding. No dividends were declared on either the preferred or common stock in 2014 or 2015. On February 10, 2016, prior to the issuance of its financial statements for the year ended December 31, 2015, Pine declared a 100% stock dividend on its common stock. Net income for 2015 was $800,000. In its 2015 financial statements, Pine's 2015 earnings per common share should be

Accepted Answer

A)  $3.78. 
B)  $3.56. 
C)  $1.88. 
D)  $1.11. 
A)  $3.78. 
B)  $3.56. 
C)  $1.88. 
D)  $1.11.

Question 5

Under IFRS recording for the issuance of Bonds Payable, the Discount on Bonds Payable and the Paid-in Capital-Convertible Bonds could be utilized.

Accepted Answer

A) True 
 B)False

Question 6

Colt Corporation purchased Massey Inc. and agreed to give stockholders of Massey Inc. 50,000 additional shares in 2016 if Massey Inc.'s net income in 2015 is $600,000 or more; in 2014 Massey Inc.'s net income is $615,000. Colt has net income for 2014 of $1,000,000 and has an average number of common shares outstanding for 2014 of 500,000 shares. What should Colt report as earnings per share for 2014?

Accepted Answer

The answer of Colt Corporation purchased Massey Inc. and agreed...

Question 7

The conversion of preferred stock into common stock requires that any excess of the par value of the common shares issued over the carrying amount of the preferred being converted should be

Accepted Answer

A)  reflected currently in income, but not as an extraordinary item. 
B)  reflected currently in income as an extraordinary item. 
C)  treated as a prior period adjustment. 
D)  treated as a direct reduction of retained earnings. 
A)  reflected currently in income, but not as an extraordinary item. 
B)  reflected currently in income as an extraordinary item. 
C)  treated as a prior period adjustment. 
D)  treated as a direct reduction of retained earnings.

Question 8

At December 31, 2014, Hancock Company had 500,000 shares of common stock issued and outstanding, 400,000 of which had been issued and outstanding throughout the year and 100,000 of which were issued on October 1, 2014. Net income for the year ended December 31, 2014, was $1,360,000. What should be Hancock's 2014 earnings per common share, rounded to the nearest penny?

Accepted Answer

A)  $2.69 
B)  $3.40 
C)  $3.20 
D)  $3.03 
A)  $2.69 
B)  $3.40 
C)  $3.20 
D)  $3.03

Question 9

Due to the importance of earnings per share information, it is required to be reported by all

Accepted Answer

The answer of Due to the importance of earnings per...

Question 10

had $700,000 net income in 2015. On January 1, 2015 there were 200,000 shares of common stock outstanding. On April 1, 20,000 shares were issued and on September 1, Colson bought 30,000 shares of treasury stock. There are 30,000 options to buy common stock at $40 a share outstanding. The market price of the common stock averaged $50 during 2015. The tax rate is 40%.During 2015, there were 40,000 shares of convertible preferred stock outstanding. The preferred is $100 par, pays $3.50 a year dividend, and is convertible into three shares of common stock.Colson issued $2,000,000 of 8% convertible bonds at face value during 2014. Each $1,000 bond is convertible into 30 shares of common stock.
InstructionsCompute diluted earnings per share for 2015. Complete the schedule and show all computations.

Accepted Answer

The answer of had $700,000 net income in 2015. On...

Question 11

Use the following information for questions 75 through 77.
On January 1, 2014, Korsak, Inc. established a stock appreciation rights plan for its executives. It entitled them to receive cash at any time during the next four years for the difference between the market price of its common stock and a pre-established price of $20 on 100,000 SARs. Current market prices of the stock are as follows:   Compensation expense relating to the plan is to be recorded over a four-year period beginning January 1, 2014.
-What amount of compensation expense should Korsak recognize for the year ended December 31, 2015?

Accepted Answer

A)  $0 
B)  $50,000 
C)  $500,000 
D)  $250,000 
A)  $0 
B)  $50,000 
C)  $500,000 
D)  $250,000

Question 12

Under the fair value method, companies compute total compensation expense based on the fair value of options on the date of exercise.

Accepted Answer

A) True 
 B)False

Question 13

Didde Co. had 300,000 shares of common stock issued and outstanding at December 31, 2014. No common stock was issued during 2015. On January 1, 2015, Didde issued 200,000 shares of nonconvertible preferred stock. During 2015, Didde declared and paid $75,000 cash dividends on the common stock and $60,000 on the preferred stock. Net income for the year ended December 31, 2015 was $465,000. What should be Didde's 2015 earnings per common share?

Accepted Answer

A)  $1.55 
B)  $1.35 
C)  $1.30 
D)  $1.10 
A)  $1.55 
B)  $1.35 
C)  $1.30 
D)  $1.10

Question 14

The if-converted method of computing earnings per share data assumes conversion of convertible securities as of the

Accepted Answer

A)  beginning of the earliest period reported (or at time of issuance, if later). 
B)  beginning of the earliest period reported (regardless of time of issuance). 
C)  middle of the earliest period reported (regardless of time of issuance). 
D)  ending of the earliest period reported (regardless of time of issuance). 
A)  beginning of the earliest period reported (or at time of issuance, if later). 
B)  beginning of the earliest period reported (regardless of time of issuance). 
C)  middle of the earliest period reported (regardless of time of issuance). 
D)  ending of the earliest period reported (regardless of time of issuance).

Question 15

In applying the treasury stock method to determine the dilutive effect of stock options and warrants, the proceeds assumed to be received upon exercise of the options and warrants

Accepted Answer

A)  are used to calculate the number of common shares repurchased at the average market price, when computing diluted earnings per share. 
B)  are added, net of tax, to the numerator of the calculation for diluted earnings per share. 
C)  are disregarded in the computation of earnings per share if the exercise price of the options and warrants is less than the ending market price of common stock. 
D)  none of these. 
A)  are used to calculate the number of common shares repurchased at the average market price, when computing diluted earnings per share. 
B)  are added, net of tax, to the numerator of the calculation for diluted earnings per share. 
C)  are disregarded in the computation of earnings per share if the exercise price of the options and warrants is less than the ending market price of common stock. 
D)  none of these.

Question 16

Hill Corp. had 600,000 shares of common stock outstanding on January 1, issued 900,000 shares on July 1, and had income applicable to common stock of $1,470,000 for the year ending December 31, 2014. Earnings per share of common stock for 2014 would be

Accepted Answer

A)  $2.45. 
B)  $1.16. 
C)  $1.40. 
D)  $1.64. 
A)  $2.45. 
B)  $1.16. 
C)  $1.40. 
D)  $1.64.

Question 17

Koch Co. sold convertible bonds at a premium. Interest is paid on May 31 and November 30. On May 31, after interest was paid, 100, $1,000 bonds are tendered for conversion into 3,000 shares of $10 par value common stock that had a market price of $40 per share. How should Koch Co. account for the conversion of the bonds into common stock under the book value method? Discuss the rationale for this method.

Accepted Answer

To account for the conversion of bonds u

Question 18

On January 1, 2014, Trent Company granted Dick Williams, an employee, an option to buy 400 shares of Trent Co. stock for $30 per share, the option exercisable for 5 years from date of grant. Using a fair value option pricing model, total compensation expense is determined to be $3,600. Williams exercised his option on September 1, 2014, and sold his 400 shares on December 1, 2014. Quoted market prices of Trent Co. stock during 2014 were:   The service period is for two years beginning January 1, 2014. As a result of the option granted to Williams, using the fair value method, Trent should recognize compensation expense for 2014 on its books in the amount of

Accepted Answer

A)  $4,000. 
B)  $3,600. 
C)  $1,800. 
D)  $0. 
A)  $4,000. 
B)  $3,600. 
C)  $1,800. 
D)  $0.

Question 19

Milo Co. had 700,000 shares of common stock outstanding on January 1, issued 126,000 shares on May 1, purchased 63,000 shares of treasury stock on September 1, and issued 54,000 shares on November 1. The weighted average shares outstanding for the year is

Accepted Answer

A)  751,000. 
B)  772,000. 
C)  793,000. 
D)  814,000. 
A)  751,000. 
B)  772,000. 
C)  793,000. 
D)  814,000.

Question 20

Fogel Co. has $3,000,000 of 8% convertible bonds outstanding. Each $1,000 bond is convertible into 30 shares of $30 par value common stock. The bonds pay interest on January 31 and July 31. On July 31, 2014, the holders of $960,000 bonds exercised the conversion privilege. On that date the market price of the bonds was 105 and the market price of the common stock was $36. The total unamortized bond premium at the date of conversion was $210,000. Fogel should record, as a result of this conversion, a

Accepted Answer

A)  credit of $163,200 to Paid-in Capital in Excess of Par. 
B)  credit of $144,000 to Paid-in Capital in Excess of Par. 
C)  credit of $67,200 to Premium on Bonds Payable. 
D)  loss of $9,600. 
A)  credit of $163,200 to Paid-in Capital in Excess of Par. 
B)  credit of $144,000 to Paid-in Capital in Excess of Par. 
C)  credit of $67,200 to Premium on Bonds Payable. 
D)  loss of $9,600.

The major difference between convertible debt and stock warrants is that upon exercise of the warrants

The recording of convertible bonds at the date of issue is the same as the recording of straight debt issues.

When convertible debt is retired by the issuer, any material difference between the cash acquisition price and the carrying amount of the debt should be

Under IFRS recording for the issuance of Bonds Payable, the Discount on Bonds Payable and the Paid-in Capital-Convertible Bonds could be utilized.

The conversion of preferred stock into common stock requires that any excess of the par value of the common shares issued over the carrying amount of the preferred being converted should be

Due to the importance of earnings per share information, it is required to be reported by all

Under the fair value method, companies compute total compensation expense based on the fair value of options on the date of exercise.

The if-converted method of computing earnings per share data assumes conversion of convertible securities as of the

In applying the treasury stock method to determine the dilutive effect of stock options and warrants, the proceeds assumed to be received upon exercise of the options and warrants

Hill Corp. had 600,000 shares of common stock outstanding on January 1, issued 900,000 shares on July 1, and had income applicable to common stock of $1,470,000 for the year ending December 31, 2014. Earnings per share of common stock for 2014 would be

Milo Co. had 700,000 shares of common stock outstanding on January 1, issued 126,000 shares on May 1, purchased 63,000 shares of treasury stock on September 1, and issued 54,000 shares on November 1. The weighted average shares outstanding for the year is

Financial Accounting and Accounting Standards

Conceptual Framework for Financial Reporting

The Accounting Information System

Income Statement and Related Information

Balance Sheet and Statement of Cash Flows

Accounting and the Time Value of Money

Cash and Receivables

Valuation of Inventories: a Cost-Basis Approach

Inventories: Additional Valuation Issues

Acquisition and Disposition of Property, Plant, and Equipment

Depreciation, Impairments, and Depletion

Intangible Assets

Current Liabilities and Contingencies

Long-Term Liabilities

Stockholders Equity

Investments

Revenue Recognition

Accounting for Income Taxes

Accounting for Pensions and Postretirement Benefits

Accounting for Leases

Accounting Changes and Error Analysis

Statement of Cash Flows

Full Disclosure in Financial Reporting

Appendix

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Exam 16: Dilutive Securities and Earnings Per Share

The major difference between convertible debt and stock warrants is that upon exercise of the warrants

The recording of convertible bonds at the date of issue is the same as the recording of straight debt issues.

When convertible debt is retired by the issuer, any material difference between the cash acquisition price and the carrying amount of the debt should be

Under IFRS recording for the issuance of Bonds Payable, the Discount on Bonds Payable and the Paid-in Capital-Convertible Bonds could be utilized.

The conversion of preferred stock into common stock requires that any excess of the par value of the common shares issued over the carrying amount of the preferred being converted should be

Due to the importance of earnings per share information, it is required to be reported by all

Under the fair value method, companies compute total compensation expense based on the fair value of options on the date of exercise.

The if-converted method of computing earnings per share data assumes conversion of convertible securities as of the

In applying the treasury stock method to determine the dilutive effect of stock options and warrants, the proceeds assumed to be received upon exercise of the options and warrants

Hill Corp. had 600,000 shares of common stock outstanding on January 1, issued 900,000 shares on July 1, and had income applicable to common stock of $1,470,000 for the year ending December 31, 2014. Earnings per share of common stock for 2014 would be

Milo Co. had 700,000 shares of common stock outstanding on January 1, issued 126,000 shares on May 1, purchased 63,000 shares of treasury stock on September 1, and issued 54,000 shares on November 1. The weighted average shares outstanding for the year is

Financial Accounting and Accounting Standards

Conceptual Framework for Financial Reporting

The Accounting Information System

Income Statement and Related Information

Balance Sheet and Statement of Cash Flows

Accounting and the Time Value of Money

Cash and Receivables

Valuation of Inventories: a Cost-Basis Approach

Inventories: Additional Valuation Issues

Acquisition and Disposition of Property, Plant, and Equipment

Depreciation, Impairments, and Depletion

Intangible Assets

Current Liabilities and Contingencies

Long-Term Liabilities

Stockholders Equity

Investments

Revenue Recognition

Accounting for Income Taxes

Accounting for Pensions and Postretirement Benefits

Accounting for Leases

Accounting Changes and Error Analysis

Statement of Cash Flows

Full Disclosure in Financial Reporting

Appendix

Filters