Exam 20: Earnings Per Share

When shares are issued by a parent company as consideration for the acquisition of a wholly owned subsidiary, the parent's EPS figures will always decline in the short term.This is because the subsidiary's earnings will only be added to the parent's earnings in the following period.

When a midyear stock dividend increases the number of common shares outstanding for the period, the average number of common shares outstanding is computed as if the stock dividend was distributed at the beginning of the year.

An anti-dilutive effect means that EPS is decreased as a result.

Anti-dilution must be considered only with complex capital structures.

Assume a company had net income of $20,000 and 8,000 common shares were outstanding the entire year.Also assume there were 2 convertible securities outstanding t entire year: What is the diluted EPS? (Rounded to the nearest cent)

In determining basic earnings per share, the annual dividend on convertible cumulative preferred shares, which are not a dilutive convertible security, should be:

Jimbo Co.began operations Jan.1, 2014.The following events related to common stock took place on the indicated dates during 2014. Jan.1 Issued 5,000 common shares Apr)1 Purchased 400 treasury shares May 1 Split 2-for-1 Aug)1 Issued 2,000 common shares Dec.1 Issued a 20% stock dividend Assuming no potentially dilutive securities, what are the weighted average shares for EPS in 2014? (Do not round intermediate calculations.Round your final answer to nearest whole number.)

On January 1, 2014, XZC had outstanding 6,000 common shares and 1,000, $3 nonconvertible cumulative preferred shares.On March 1, 2014, the corporation sold and issued an additional 6,000 common shares.At year-end, there were common stock warrants outstanding for 200 common shares; the option price was $15.The company earns interest at 10% and has a 40% tax rate.Net income was $41,675.Compute the diluted EPS that would be reported and show your computations. Diluted EPS: $ ________

On January 1, 2012, JMR had 30,000 common shares issued and outstanding.On July 1, JMR sold 500 shares.The net income for the year was $300,000.Calculate the basic earnings per share.

Steps in calculating diluted EPS include the following except:

You are given the following information about JMR Ltd.: 80,000 common shares outstanding on January 1, 2012 6,000 shares sold on March 1, 2012 3,000 shares sold on September 1, 2012 3 for 1 Stock split recorded on October 1, 2012 Net Income for the year $1,040,000 Required: Calculated the basic EPS.

When there has been a retrospective change in Accounting policy or a restatement, EPS figures must be recalculated accordingly.

Convertible securities and options are always included in the calculation of diluted EPS.

Stock rights, options, and warrants determined to be dilutive when computing fully diluted earnings per share may be anti-dilutive when computing basic earnings per share.

DCE had 900 common shares outstanding on January 1, 2014, issued 600 shares on May 1 and had income applicable to common shares of $5,200 for the year ending December 31, 2014.Earnings per common share for 2014 would be: (Rounded to the nearest cent)

At December 31, 2013, HIJ had 2,000 common shares outstanding.On January 1, 2014, HIJ issued 1,000 convertible preferred (one share of common for one share of preferred)shares.During 2014, HIJ declared and paid $4,000 cash dividends on the common and $4,000 cash dividends on the preferred (the annual requirement).Net income for the year ended December 31, 2014, was $36,000.Assuming an income tax rate of 50 percent, what should be diluted earnings per share for the year ended December 31, 2014?

The 2014 net income of MNO was $300,000, and 100,000 of its common shares were outstanding during the entire year.In addition, outstanding options existed to purchase 10,000 common shares at $10 per share.These options were granted in 2012 and none had been exercised by December 31, 2014.MNO earned interest at 8% and had a 50% tax rate.The amount, which should be shown as MNO's basic earnings per share for 2014, is (rounded to the nearest cent):

On January 1, 2012, KAR had 60,000 common shares issued and outstanding.On July 1, KAR sold 1,000 shares.KAR The net income for the year was $80,000.Calculate the basic earnings per share.

Stock dividend and stock splits are treated as though they had been in effect for the entire period.

At the beginning of the year, a firm issued (1)$100,000 of 5% bonds (at face value)convertible into a total of 2,000 of the firm's common shares, and (2)$1,000, $9 cumulative preferred shares convertible into a total of 1,000 of the firm's common shares.The tax rate is 40%.There were no conversions during the year; the firm earned $100,000, and had 20,000 common shares outstanding the entire year.Compute basic EPS and diluted EPS.