Exam 20: Earnings Per Share

A firm has correctly computed the following values: (Its shares are trading on the Vancouver Stock Exchange) Basic EPS = $4.32 Diluted EPS = $4.17 Which of the following correctly states the EPS amounts to be reported?

Earnings for a firm for the current year are $20,000 and the weighted average number of common shares before considering potentially dilutive securities is 18,000.The firm has no preferred shares but has 100, 8%, $1,000 convertible bonds which were issued at face value many years ago.Each bond is convertible into 50 common shares.The tax rate is 40%.Compute EPS to be reported for this firm.(Rounded to the nearest cent)

At December 31, 2013, GHI had 400 common shares outstanding.On October 1, 2014, an additional 100 common shares were issued.In addition, GHI had $40,000 of 8 percent, convertible bonds outstanding at December 31, 2013, which are convertible into 225 common shares.No bonds were converted into common shares in 2014.Net income for the year ended December 31, 2014, was $14,000.Assuming the income tax rate was 50 percent, the diluted earnings per share for the year ended December 31, 2014 should be (rounded to the nearest cent):

Anti-dilutive convertible securities would generally be used in the calculation of:

Wholly-owned subsidiaries are required to disclose earnings per share.

Consider the following data for ABC Inc for the year ended December 31st, 2014: New ordinary shares issued Number issued 100,000 Issue date March 1 Convertible preferred shares Issue date carry forward from prior year Number issued 600,000 Conversion factor each share is convertible into one ordinary share Conversion during year 500,000 on July 1 Dividend rate $.05 per share per quarter, paid at the end of each quarter (March 31, June 30, Sept.30 Dec.31) Convertible debentures Par value $10,000,000 Issue date carry forward from prior year Conversion factor each $1000 par value bond is convertible into 20 shares Conversion during year entire issue converted May 1 Annual interest rate 4%, payable semi-annually on November 1 and May 1 Warrants Issue date carry forward from prior year Exercise factor total warrants issued can be exchanged for 500,000 shares at a price of $60 per share Exercised during year: All warrants were exercised September 1 Avg.mkt.price from beginning of year to September 1: $66.101426 per share Options Issue date July 1 Exercise factor total options issued can be exchanged for 1,000,000 ordinary shares at $85 per share.Expiry date 10 years from date of issue Exercised during year: none Ordinary shares outstanding, Jan.1, 2014: 3,300,000 Year-end Dec.31, 2014: Tax rate 40% Pre-tax rate of return 18% Average market price for the year $71 per shareNet income for 2014: $7,500,000 Required: Compute ABC Inc's Basic and Fully Diluted EPS figures for the year ended December 31st, 2014.

In some cases, diluted earnings per share amounts may be the same as the basic earnings per share amounts.

Concerning earnings per share for a complex capital structure, which of the following statements is incorrect?

Provided that the conditions for share issuance are met at the end of a period and the date of the contingency period has not expired, contingently issuable shares will be included in EPS calculations.

Bonds and preferred share adjustments are based on the if-converted method.

Earnings per share refer to the amount of earnings attributable to each share of common and preferred stock.

Corporations with simple capital structures are required to present two sets of EPS data.

A company earned $20,000 in 2014 and had 20,000 common shares outstanding the entir year.The following four potentially dilutive securities were also outstanding the entire year.The numerator and denominator of the D/A ratios are as indicated. What is the diluted EPS? (Rounded to the nearest cent)

The treasury stock method is only used for options, and only the denominator is affected.

If the corporation purchases common treasury stock, those shares would be included in the EPS computation only for the fraction of the year that they were outstanding.

The diluted EPS should be disclosed in the financial statements only if it is materially different from basic EPS.

The reported diluted earnings per share figure may be:

For purposes of computing the average number of common shares outstanding, stock dividends are treated in the same manner as stock splits.

SKZ reported the following capital structure on December 31, 2014, and the related results of operations for 2014: Additional data: (a)Company earns interest at 10% (b)Option price of common shares for holders of common stock warrants, $54. (c)No preferred dividends were declared or paid during 2014. (d)The tax rate is 40%. Compute Basic EPS $ ________ Diluted EPS $ ________

ABC Inc.began business on January 1, 2014.Due to difficulties in getting the business started, 30 common shares were issued on January 1, 2014 to the organizers and 15 additional shares were sold on that date.The company wanted the market to hear about the shares.Therefore, the following share transactions were implemented during the year 2014: February 1: 2 for 1 stock split April 1: 10 percent stock dividend August 1: 5 for 1 stock split December 1: 2 for 1 reverse stock split The weighted average number of shares outstanding for 2014 was: (Rounded to the nearest whole number)