Exam 20: Earnings Per Share

For purposes of computing the weighted-average number of shares outstanding during the year, a mid-year event that must be treated as occurring at the beginning of the year is the:

If net income is $25,000 and there were 18,000 common shares issued and outstanding the entire year, and 100 cumulative, nonconvertible, 6% $100 par preferred shares outstanding the entire year, what is EPS if no dividends were declared during the year.There are two years' dividends in arrears on the preferred shares.(Rounded to the nearest cent)

Diluted EPS indicate long-run impact that the likely conversion will have on the earnings attributable to common shares.

Diluted earnings per share recalculate EPS as though the conversions of different instruments had taken place at the end of the year.

Only firms with a complex capital structure must compute diluted EPS.

Basic earnings per share represent the amount of earnings attributable to:

A simple capital structure refers to a shareholders' equity section which only has common shares and no potentially dilutive securities that, upon their conversion or exercise in the aggregate, would dilute earnings per share.

For purposes of computing the weighted average number of shares outstanding during the year, a midyear event that must be treated as occurring at the beginning of the year is the:

You calculate basic EPS to be $15.87 and diluted EPS to be $11.65.From a disclosure point, what needs to be disclosed?

FED had 100 common shares issued and outstanding at December 31, 2013.On July 1, 2014, FED issued a 10 percent stock dividend.Unexercised stock options to purchase 20 common shares (adjusted for 2014 stock dividend)at $20 per share were outstanding at the beginning and end of 2014.The average market price of FED'S common shares (which was not affected by the stock dividend)was $25 per share during 2014.The ending market price was $40.FED earned interest at 8% and had a 50% tax rate.Net income for the year ended December 31, 2014, was $2,200.What was FED'S 2014 diluted earnings per share, rounded to the nearest cent?

In determining basic earnings per share, the annual dividend on nonconvertible cumulative preferred shares should be:

A basic earnings per share figure is presented for:

On January 1, 2012, KER had 25,000 common shares issued and outstanding.On July 1, KER sold 5,000 shares.The net income for the year was $800,000.Calculate the basic earnings per share.

At December 31, 2013, XYZ had 40,000 common shares issued and outstanding and 10,000 nonconvertible preferred shares issued and outstanding.XYZ's net income for the year ended December 31, 2014, was $120,000.During 2014, XYZ declared and paid $50,000 cash dividends on common and $8,000 cash dividends on the nonconvertible preferred (the annual requirement).There were no common share or preferred share transactions during the year.The earnings per common share for the year ended December 31, 2014, should be:

What is diluted EPS?

When computing diluted earnings per share, convertible securities are a sale of additional common stock.

Nonconvertible, cumulative, preferred shares affect the computation of EPS (for a simple capital structure), basic EPS, but not diluted EPS.

Last year, TUV had 40,000 $15 par, 7 percent, cumulative, convertible preferred shares outstanding.The Board of Directors did not declare a dividend for the current period because all of these shares were converted to common shares on the first day of the period.What is the effect on the numerator of the EPS calculation for this year due to the preferred shares? (Tax rate is 40%).

When a publicly traded company has income from discontinued operations, the basic and earnings per share amounts specific to the discontinued operation must be shown separately.

A simple capital structure could have, in addition to common shares, a security that is a: