Question 1

Which statement is correct about the "net income attributable to ordinary shareholders"?

Accepted Answer

A) Other comprehensive income (OCI)is included in this calculation. 
B) Other comprehensive income (OCI)is excluded from this calculation. 
C) Dividends to preferred shareholders are added to the net income. 
D) Dividends to common shareholders are added to the net income. 
A) Other comprehensive income (OCI)is included in this calculation. 
B) Other comprehensive income (OCI)is excluded from this calculation. 
C) Dividends to preferred shareholders are added to the net income. 
D) Dividends to common shareholders are added to the net income.

Question 2

Calculate the income effect on the incremental EPS for the following instrument: Face value of 50,000 preferred shares with dividend rate of 5%
$5,000,000
Conversion rate for each preferred share
5 ordinary shares
Income tax rate
30%

Accepted Answer

A) $1.00 
B) $75,000 
C) $175,000 
D) $250,000 
A) $1.00 
B) $75,000 
C) $175,000 
D) $250,000

Question 3

Which statement is correct about earnings per share (EPS)?

Accepted Answer

A) EPS does not need to be disclosed under IFRS. 
B) EPS needs to be disclosed under IFRS. 
C) EPS is calculated for preferred shares. 
D) EPS is a ratio used to assess leverage. 
A) EPS does not need to be disclosed under IFRS. 
B) EPS needs to be disclosed under IFRS. 
C) EPS is calculated for preferred shares. 
D) EPS is a ratio used to assess leverage.

Question 4

For stock splits and stock dividends, while it is possible to state the number of shares as beginning-of-year equivalents, it makes more sense to use end-of-year equivalents because financial statement readers are evaluating EPS after the end of the year. Explain why the adjustment for stock splits and stock dividends is standardized.

Accepted Answer

The reasons for standardizing the adjust

Question 5

Which statement is correct about diluted EPS?

Accepted Answer

A) The incremental EPS of the least dilutive item is compared to the basic EPS. 
B) The incremental EPS of the most dilutive item is compared to the basic EPS. 
C) If the incremental EPS is higher than the basic EPS, the item is dilutive. 
D) If the incremental EPS is lower than the basic EPS, the item is anti-dilutive. 
A) The incremental EPS of the least dilutive item is compared to the basic EPS. 
B) The incremental EPS of the most dilutive item is compared to the basic EPS. 
C) If the incremental EPS is higher than the basic EPS, the item is dilutive. 
D) If the incremental EPS is lower than the basic EPS, the item is anti-dilutive.

Question 6

Calculate the share effect on the incremental EPS for the following instrument: Face value of 50,000 preferred shares with dividend rate of 5%
$5,000,000
Conversion rate for each preferred share
5 ordinary shares
Income tax rate
30%

Accepted Answer

A) 5 
B) 25,000 
C) 50,000 
D) 250,000 
A) 5 
B) 25,000 
C) 50,000 
D) 250,000

Question 7

Calculate the incremental EPS for the following instrument: Face value of 10,000 preferred shares with dividend rate of 5%
$5,000,000
Conversion rate for each preferred share
25 ordinary shares
Income tax rate
30%

Accepted Answer

A) $0.30 
B) $0.70 
C) $1.00 
D) $2.00 
A) $0.30 
B) $0.70 
C) $1.00 
D) $2.00

Question 8

What is the meaning of "out-of-the-money warrants"?

Accepted Answer

A) Warrants are out-of-the-money if the market price of the share exceeds the exercise price. 
B) Warrants are out-of-the-money if the market price of the share is less than the exercise price. 
C) Warrants are out-of-the-money if the market price of the share equals the exercise price. 
D) Warrants are out-of-the-money when the market price means that it will be exercised. 
A) Warrants are out-of-the-money if the market price of the share exceeds the exercise price. 
B) Warrants are out-of-the-money if the market price of the share is less than the exercise price. 
C) Warrants are out-of-the-money if the market price of the share equals the exercise price. 
D) Warrants are out-of-the-money when the market price means that it will be exercised.

Question 9

Which statement is correct?

Accepted Answer

A) Diluted EPS decreases the comparability of financial statements. 
B) Diluted EPS decreases the understandability of financial statements. 
C) Diluted EPS addresses the moral hazard information asymmetry. 
D) Diluted EPS is calculated in the same manner as basic EPS. 
A) Diluted EPS decreases the comparability of financial statements. 
B) Diluted EPS decreases the understandability of financial statements. 
C) Diluted EPS addresses the moral hazard information asymmetry. 
D) Diluted EPS is calculated in the same manner as basic EPS.

Question 10

Traditional Bathrooms Inc. (TBI)had 80,000 ordinary shares outstanding on January 1, 2020. Transactions throughout 2020 affecting its shareholdings follow.
• February 1: TBI issued 200,000, $10, cumulative 10% preferred shares.
• March 1: TBI issued 40,000 ordinary shares.
• April l: TBI declared and issued a 8% stock dividend on the ordinary shares.
• July 1: TBI repurchased and cancelled 30,000 ordinary shares.
• October 1: TBI declared and issued a 3-for-l stock split on the ordinary shares.
• December 31: TBI declared $99,600 in dividends on the ordinary shares.
• Net income for the year ended December 31, 2020 was $600,000. Its tax rate was 40%.
Required:
a. What was weighted average number of ordinary shares outstanding in 2020?
b. What was basic EPS in 2020?
c. If the preferred shares issued on February 1, 2020 were non-cumulative, what would basic EPS for 2020 have been?

Accepted Answer

@#IMG-DLM& Supporting comments and computations
(1

Question 11

Calculate the incremental EPS for the following instrument: Convertible bonds outstanding, effective yield of 7% and coupon rate of 7%
$2,000,000
Issue date
January 1, 2021
Maturity date
December 31, 2024
Conversion rate for each $1,000 bond
20 ordinary shares
Income tax rate
25%

Accepted Answer

A) $0.75 
B) $0.88 
C) $2.25 
D) $2.63 
A) $0.75 
B) $0.88 
C) $2.25 
D) $2.63

Question 12

Which statement is correct about the "income effect" on EPS?

Accepted Answer

A) This is the incremental before-tax income available to ordinary shareholders. 
B) This is the incremental after-tax income available to ordinary shareholders. 
C) This is the incremental number of ordinary shares outstanding before conversion. 
D) This is the incremental number of ordinary shares outstanding after conversion. 
A) This is the incremental before-tax income available to ordinary shareholders. 
B) This is the incremental after-tax income available to ordinary shareholders. 
C) This is the incremental number of ordinary shares outstanding before conversion. 
D) This is the incremental number of ordinary shares outstanding after conversion.

Question 13

Which statement is correct?

Accepted Answer

A) A complex capital structure includes potentially dilutive securities. 
B) A complex capital structure excludes potentially dilutive securities. 
C) EPS applies only to a company with a complex capital structure. 
D) A company with a complex capital structure calculates only basic EPS. 
A) A complex capital structure includes potentially dilutive securities. 
B) A complex capital structure excludes potentially dilutive securities. 
C) EPS applies only to a company with a complex capital structure. 
D) A company with a complex capital structure calculates only basic EPS.

Question 14

Calculate the incremental EPS for the following instrument: Convertible bonds outstanding, yield of 5% and coupon rate of 5%
$2,000,000
Issue date
January 1, 2021
Maturity date
December 31, 2028
Conversion rate for each $1,000 bond
40 ordinary shares
Income tax rate
25%

Accepted Answer

A) $0.94 
B) $0.75 
C) $0.31 
D) $0.25 
A) $0.94 
B) $0.75 
C) $0.31 
D) $0.25

Question 15

What is the meaning of "weighted average number of ordinary shares outstanding"?

Accepted Answer

A) This is not used in the EPS calculation. 
B) This refers to the numerator of the EPS calculation. 
C) This refers to the denominator of the basic EPS calculation. 
D) This is the not used in the diluted EPS calculation. 
A) This is not used in the EPS calculation. 
B) This refers to the numerator of the EPS calculation. 
C) This refers to the denominator of the basic EPS calculation. 
D) This is the not used in the diluted EPS calculation.

Question 16

Know Your Rights Co. has three stock option plans outstanding on December 31, 2020. They provide the holders with the following entitlements:
• Stock option A-The holders may purchase 55,000 ordinary shares at any time on or before December 31, 2024 for $41 each.
• Stock option B-The holders may purchase 2,000 ordinary shares at any time on or before December 31, 2021 for $47 each. From January 1, 2022 to December 31, 2024 the holders may purchase 7,000 ordinary shares for $52 each.
• Stock option C-The holders may purchase 12,000 ordinary shares at any time on or before December 31, 2022 for $51 each.
The average price of ordinary shares in 2020 was $50 and its basic EPS from continuing operations for the year was $1.01.
Required:
a. Which of the stock options are dilutive and which are antidilutive in 2020? What is the rule in this respect?
b. Assuming that all three option plans have been in place the entire year, for each plan, determine the incremental number of shares, if any, that need to be considered for diluted EPS purposes.
c. Assume that stock option A was issued on April 1, 2020. Does this change your answer to part b? If so, what is the revised number of incremental shares for option A that need to be considered for diluted EPS purposes?

Accepted Answer

a. Stock options A and B are dilutive, w

Question 17

Briefly explain the main the difference in the requirements of IFRS and ASPE in regards to EPS information.

Accepted Answer

IFRS requires publicly accountable enter

Question 18

Accu Tech Renovations Corp. (ATRC)was incorporated on January 1, 2021. At that time it issued 100,000 ordinary shares; 80,000, $20, 3% preferred shares "A"; and 40,000, $20, 6% preferred shares "B." Net income for the year ended December 31, 2021 was $1,800,000. ATRC declares and pays total of $238,000 in dividends. The series A preferred shares arc cumulative and the series B preferred shares are non-cumulative. Series A must be fully paid their current entitlement before any monies are paid to the Series B shareholders.
Required:
Compute basic EPS.

Accepted Answer

@#IMG-DLM& Supporting comment-238,000 in dividends

Question 19

Which statement is correct about basic EPS?

Accepted Answer

A) It indicates the net income before tax attributable to a company's ordinary shares. 
B) It indicates the net income before tax attributable to a company's preferred shares. 
C) It indicates the net income attributable to a company's preferred shares. 
D) It indicates the net income attributable to a company's ordinary shares. 
A) It indicates the net income before tax attributable to a company's ordinary shares. 
B) It indicates the net income before tax attributable to a company's preferred shares. 
C) It indicates the net income attributable to a company's preferred shares. 
D) It indicates the net income attributable to a company's ordinary shares.

Question 20

Calculate the income effect on the incremental EPS for the following instrument: Convertible bonds outstanding, yield of 8% and coupon rate of 8%
$5,000,000
Issue date
January 1, 2021
Maturity date
December 31, 2028
Conversion rate for each $1,000 bond
25 ordinary shares
Income tax rate
30%

Accepted Answer

A) $0.96 
B) $2.24 
C) $120,000 
D) $280,000 
A) $0.96 
B) $2.24 
C) $120,000 
D) $280,000

Which statement is correct about the "net income attributable to ordinary shareholders"?

Calculate the income effect on the incremental EPS for the following instrument: Face value of 50,000 preferred shares with dividend rate of 5% $5,000,000 Conversion rate for each preferred share 5 ordinary shares Income tax rate 30%

Which statement is correct about earnings per share (EPS)?

Which statement is correct about diluted EPS?

Calculate the share effect on the incremental EPS for the following instrument: Face value of 50,000 preferred shares with dividend rate of 5% $5,000,000 Conversion rate for each preferred share 5 ordinary shares Income tax rate 30%

Calculate the incremental EPS for the following instrument: Face value of 10,000 preferred shares with dividend rate of 5% $5,000,000 Conversion rate for each preferred share 25 ordinary shares Income tax rate 30%

What is the meaning of "out-of-the-money warrants"?

Which statement is correct?

Calculate the incremental EPS for the following instrument: Convertible bonds outstanding, effective yield of 7% and coupon rate of 7% $2,000,000 Issue date January 1, 2021 Maturity date December 31, 2024 Conversion rate for each $1,000 bond 20 ordinary shares Income tax rate 25%

Which statement is correct about the "income effect" on EPS?

Which statement is correct?

Calculate the incremental EPS for the following instrument: Convertible bonds outstanding, yield of 5% and coupon rate of 5% $2,000,000 Issue date January 1, 2021 Maturity date December 31, 2028 Conversion rate for each $1,000 bond 40 ordinary shares Income tax rate 25%

What is the meaning of "weighted average number of ordinary shares outstanding"?

Briefly explain the main the difference in the requirements of IFRS and ASPE in regards to EPS information.

Which statement is correct about basic EPS?

Calculate the income effect on the incremental EPS for the following instrument: Convertible bonds outstanding, yield of 8% and coupon rate of 8% $5,000,000 Issue date January 1, 2021 Maturity date December 31, 2028 Conversion rate for each $1,000 bond 25 ordinary shares Income tax rate 30%

Current Liabilities and Contingencies

Non-Current Financial Liabilities

Equities

Complex Financial Instruments

Pensions and Other Employee Future Benefits

Accounting for Leases

Accounting for Income Taxes

Accounting Changes

Statement of Cash Flows

Filters

Exam 5: Earnings Per Share

Which statement is correct about the "net income attributable to ordinary shareholders"?

Calculate the income effect on the incremental EPS for the following instrument: Face value of 50,000 preferred shares with dividend rate of 5% $5,000,000 Conversion rate for each preferred share 5 ordinary shares Income tax rate 30%

Which statement is correct about earnings per share (EPS)?

Which statement is correct about diluted EPS?

Calculate the share effect on the incremental EPS for the following instrument: Face value of 50,000 preferred shares with dividend rate of 5% $5,000,000 Conversion rate for each preferred share 5 ordinary shares Income tax rate 30%

Calculate the incremental EPS for the following instrument: Face value of 10,000 preferred shares with dividend rate of 5% $5,000,000 Conversion rate for each preferred share 25 ordinary shares Income tax rate 30%

What is the meaning of "out-of-the-money warrants"?

Which statement is correct?

Calculate the incremental EPS for the following instrument: Convertible bonds outstanding, effective yield of 7% and coupon rate of 7% $2,000,000 Issue date January 1, 2021 Maturity date December 31, 2024 Conversion rate for each $1,000 bond 20 ordinary shares Income tax rate 25%

Which statement is correct about the "income effect" on EPS?

Which statement is correct?

Calculate the incremental EPS for the following instrument: Convertible bonds outstanding, yield of 5% and coupon rate of 5% $2,000,000 Issue date January 1, 2021 Maturity date December 31, 2028 Conversion rate for each $1,000 bond 40 ordinary shares Income tax rate 25%

What is the meaning of "weighted average number of ordinary shares outstanding"?

Briefly explain the main the difference in the requirements of IFRS and ASPE in regards to EPS information.

Which statement is correct about basic EPS?

Calculate the income effect on the incremental EPS for the following instrument: Convertible bonds outstanding, yield of 8% and coupon rate of 8% $5,000,000 Issue date January 1, 2021 Maturity date December 31, 2028 Conversion rate for each $1,000 bond 25 ordinary shares Income tax rate 30%

Current Liabilities and Contingencies

Non-Current Financial Liabilities

Equities

Complex Financial Instruments

Pensions and Other Employee Future Benefits

Accounting for Leases

Accounting for Income Taxes

Accounting Changes

Statement of Cash Flows

Filters