Question 1

Which statement is correct?

Accepted Answer

A) Diluted EPS will always be less than basic EPS. 
B) Diluted EPS will always be greater than basic EPS. 
C) Diluted EPS will always be equal to EPS. 
D) Diluted EPS will be less than or equal to basic EPS. 
A) Diluted EPS will always be less than basic EPS. 
B) Diluted EPS will always be greater than basic EPS. 
C) Diluted EPS will always be equal to EPS. 
D) Diluted EPS will be less than or equal to basic EPS.

Question 2

What is the meaning of "at-the-money options"?

Accepted Answer

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

Question 3

Which statement is correct?

Accepted Answer

A) Share issuances increase the EPS denominator. 
B) Stock splits have the same effect on EPS as share issuances. 
C) Stock dividends have the same effect on EPS as share issuances. 
D) Share issuances decrease the EPS denominator. 
A) Share issuances increase the EPS denominator. 
B) Stock splits have the same effect on EPS as share issuances. 
C) Stock dividends have the same effect on EPS as share issuances. 
D) Share issuances decrease the EPS denominator.

Question 4

Explain why dividends to preferred shareholders are adjusted in the numerator of the EPS calculation.

Accepted Answer

We need to adjust for dividends on prefe

Question 5

Calculate the income effect on 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) $30,000 
B) $35,000 
C) $90,000 
D) $105,000 
A) $30,000 
B) $35,000 
C) $90,000 
D) $105,000

Question 6

Calculate the share effect on 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) 0.63 
B) 0.94 
C) 75,000 
D) 80,000 
A) 0.63 
B) 0.94 
C) 75,000 
D) 80,000

Question 7

Which statement is correct about the "if-converted" method for EPS?

Accepted Answer

A) This method assumes the convertible security is converted into ordinary shares at the end of the fiscal period. 
B) This method assumes the convertible security is converted into ordinary shares at the beginning of the fiscal period. 
C) This method assumes the convertible security is converted into ordinary shares evenly over the fiscal period. 
D) This method assumes the convertible security is converted into ordinary shares at the mid-point of the fiscal period. 
A) This method assumes the convertible security is converted into ordinary shares at the end of the fiscal period. 
B) This method assumes the convertible security is converted into ordinary shares at the beginning of the fiscal period. 
C) This method assumes the convertible security is converted into ordinary shares evenly over the fiscal period. 
D) This method assumes the convertible security is converted into ordinary shares at the mid-point of the fiscal period.

Question 8

Which statement is correct?

Accepted Answer

A) Dilutive potential ordinary shares, if converted, will decrease EPS or increase the loss per share from continuing operations. 
B) Dilutive potential ordinary shares, if converted, will increase EPS or increase the loss per share from continuing operations. 
C) Anti-dilutive potential ordinary shares, if converted, will increase EPS or increase the loss per share from continuing operations. 
D) Anti-dilutive potential ordinary shares, if converted, will decrease EPS or decrease the loss per share from continuing operations. 
A) Dilutive potential ordinary shares, if converted, will decrease EPS or increase the loss per share from continuing operations. 
B) Dilutive potential ordinary shares, if converted, will increase EPS or increase the loss per share from continuing operations. 
C) Anti-dilutive potential ordinary shares, if converted, will increase EPS or increase the loss per share from continuing operations. 
D) Anti-dilutive potential ordinary shares, if converted, will decrease EPS or decrease the loss per share from continuing operations.

Question 9

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. Both the preferred shares series A and B are cumulative in nature. Series A must be fully paid their current entitlement as well as any arrears 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 10

Explain why the IASB requires the disclosure of basic and diluted EPS.

Accepted Answer

The need for basic EPS is simply to incr

Question 11

Calculate the incremental EPS for the following instrument: Convertible bonds outstanding, yield of 6% and coupon rate of 6%
$3,000,000
Issue date
January 1, 2019
Maturity date
December 31, 2024
Conversion rate for each $1,000 bond
20 ordinary shares
Income tax rate
30%

Accepted Answer

A) 0.63 
B) 1.88 
C) 40,000 
D) 2.10 
A) 0.63 
B) 1.88 
C) 40,000 
D) 2.10

Question 12

Which statement is correct?

Accepted Answer

A) Companies with a simple capital structure must disclose diluted EPS. 
B) Companies with a complex capital structure must disclose diluted EPS. 
C) Companies with a simple capital structure do not need to disclose basic EPS. 
D) Companies with a complex capital structure do not need to disclose diluted EPS. 
A) Companies with a simple capital structure must disclose diluted EPS. 
B) Companies with a complex capital structure must disclose diluted EPS. 
C) Companies with a simple capital structure do not need to disclose basic EPS. 
D) Companies with a complex capital structure do not need to disclose diluted EPS.

Question 13

Which statement is correct about the "if-converted" method for EPS?

Accepted Answer

A) This method assumes the interest is paid on the convertible security until it was converted into ordinary shares. 
B) This method assumes the interest is paid on the convertible security for one-half of the year. 
C) This method assumes the interest is paid on the convertible security for the period after its issue date. 
D) This method assumes the no interest is paid on the convertible security for the entire year. 
A) This method assumes the interest is paid on the convertible security until it was converted into ordinary shares. 
B) This method assumes the interest is paid on the convertible security for one-half of the year. 
C) This method assumes the interest is paid on the convertible security for the period after its issue date. 
D) This method assumes the no interest is paid on the convertible security for the entire year.

Question 14

Ned Company reported the following information for its fiscal year: Net income
$500,000
Preferred dividends
30,000
Common share dividends
20,000
Preferred shares are cumulative and carry an annual dividend of
10,000
The preferred dividends listed above include the current year and prior accumulated dividends. What is the amount of net income available to common shareholders?

Accepted Answer

A) $440,000 
B) $450,000 
C) $470,000 
D) $490,000 
A) $440,000 
B) $450,000 
C) $470,000 
D) $490,000

Question 15

Which statement is correct?

Accepted Answer

A) Basic EPS increases the understandability of financial statements. 
B) Basic EPS decreases the understandability of financial statements. 
C) Basic EPS addresses the moral hazard information asymmetry. 
D) Basic EPS can be calculated in different ways by different companies. 
A) Basic EPS increases the understandability of financial statements. 
B) Basic EPS decreases the understandability of financial statements. 
C) Basic EPS addresses the moral hazard information asymmetry. 
D) Basic EPS can be calculated in different ways by different companies.

Question 16

What are the two assumptions of the "if-converted method" used when calculation incremental EPS?

Accepted Answer

The if-converted method assumes:
(i)that

Question 17

Explain the purpose of incremental EPS.

Accepted Answer

Incremental EPS is used to rank the orde

Question 18

Which statement is correct?

Accepted Answer

A) When convertible securities are redeemed during the year, the income effect and share effect are not pro-rated for the diluted EPS calculation. 
B) When convertible securities are issued during the year, the income effect and share effect are not pro-rated for the diluted EPS calculation. 
C) When the right to convert convertible securities expires during the year, the income effect and share effect are pro-rated for the diluted EPS calculation. 
D) When convertible securities are issued at the beginning of the year, the income effect and share effect are pro-rated for the diluted EPS calculation. 
A) When convertible securities are redeemed during the year, the income effect and share effect are not pro-rated for the diluted EPS calculation. 
B) When convertible securities are issued during the year, the income effect and share effect are not pro-rated for the diluted EPS calculation. 
C) When the right to convert convertible securities expires during the year, the income effect and share effect are pro-rated for the diluted EPS calculation. 
D) When convertible securities are issued at the beginning of the year, the income effect and share effect are pro-rated for the diluted EPS calculation.

Question 19

For the year ended December 31, 2021, Harvest Productions Inc. earned $4,000,000. Outstanding preferred shares included $400,000 in 3% cumulative preferred shares issued on January 1, 2020 and $500,000 in 2% non-cumulative preferred shares issued on January 1, 2021. Dividends on the cumulative preferred shares were not declared in 2020.
Harvest did not declare any dividends during 2021.
Required:
Determine the net income available to ordinary shareholders for the year ended December 31, 2021.

Accepted Answer

@#IMG-DLM& The yearly dividend entitleme

Question 20

Explain why other comprehensive income is excluded from the numerator of the EPS calculation.

Accepted Answer

We exclude other comprehensive income (O

Which statement is correct?

What is the meaning of "at-the-money options"?

Which statement is correct?

Explain why dividends to preferred shareholders are adjusted in the numerator of the EPS calculation.

Calculate the share effect on 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%

Which statement is correct about the "if-converted" method for EPS?

Which statement is correct?

Explain why the IASB requires the disclosure of basic and diluted EPS.

Calculate the incremental EPS for the following instrument: Convertible bonds outstanding, yield of 6% and coupon rate of 6% $3,000,000 Issue date January 1, 2019 Maturity date December 31, 2024 Conversion rate for each $1,000 bond 20 ordinary shares Income tax rate 30%

Which statement is correct?

Which statement is correct about the "if-converted" method for EPS?

Which statement is correct?

What are the two assumptions of the "if-converted method" used when calculation incremental EPS?

Explain the purpose of incremental EPS.

Which statement is correct?

Explain why other comprehensive income is excluded from the numerator of the EPS calculation.

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?

What is the meaning of "at-the-money options"?

Which statement is correct?

Explain why dividends to preferred shareholders are adjusted in the numerator of the EPS calculation.

Calculate the share effect on 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%

Which statement is correct about the "if-converted" method for EPS?

Which statement is correct?

Explain why the IASB requires the disclosure of basic and diluted EPS.

Calculate the incremental EPS for the following instrument: Convertible bonds outstanding, yield of 6% and coupon rate of 6% $3,000,000 Issue date January 1, 2019 Maturity date December 31, 2024 Conversion rate for each $1,000 bond 20 ordinary shares Income tax rate 30%

Which statement is correct?

Which statement is correct about the "if-converted" method for EPS?

Which statement is correct?

What are the two assumptions of the "if-converted method" used when calculation incremental EPS?

Explain the purpose of incremental EPS.

Which statement is correct?

Explain why other comprehensive income is excluded from the numerator of the EPS calculation.

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