Question 1

A reverse split may be used to increase the value per share of a company.

Accepted Answer

A) True 
 B)False

Question 2

ABC experienced the following changes in its capital structure during 2014: Outstanding on January 1, 2014, 90 common stock shares Sold 120 common shares on February 1, 2014
Sold 60 common shares on April 1, 2014
Issued a 2 for 1 split on August 1, 2014
ABC's weighted average number of common shares outstanding for 2014 would be:

Accepted Answer

A) 490. 
B) 540. 
C) 245. 
D) 315. 
A) 490. 
B) 540. 
C) 245. 
D) 315.

Question 3

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 purchase of treasury stock.

Accepted Answer

A) True 
 B)False

Question 4

Diluted EPS is meant to be a worst-case scenario.

Accepted Answer

A) True 
 B)False

Question 5

XYZ reported the following equity accounts on December 31 of this year:   Additional Information: (1)The Board of Directors declared a 10 percent stock dividend on all classes of shares o April 1, and issued these shares on August 1.
(2)Income for the period was $88.
(3)There were no share transactions during the year, other than the stock dividend.
The basic earnings per share amount is: (Rounded to the nearest cent.)

Accepted Answer

A) $2.00. 
B) $1.68. 
C) $2.20. 
D) $1.52. 
E) There would not be a basic earnings per share figure for XYZ this year. 
A) $2.00. 
B) $1.68. 
C) $2.20. 
D) $1.52. 
E) There would not be a basic earnings per share figure for XYZ this year.

Question 6

Options are in-the-money if the exercise price is higher that the market value of common shares.

Accepted Answer

A) True 
 B)False

Question 7

WXY had the following common share transactions:   The weighted average number of shares outstanding for the year was: (Round your answer to nearest whole number.)

Accepted Answer

A) 129 shares. 
B) 110 shares. 
C) 95 shares. 
D) 115 shares. 
A) 129 shares. 
B) 110 shares. 
C) 95 shares. 
D) 115 shares.

Question 8

A company had 50,000 common shares and the following 3 convertible securities outstanding the entire year: 1.6%, $100 par cumulative preferred shares, 200 shares outstanding, each convertible int 5 common shares
2)200, 6% convertible bonds, face $1,000, each bond convertible into 40 common shares
3)2,000 stock options to purchase one common share each at $40.
The company earns interest at 6%.Its net income after tax income was $75,000.The tax rate is 40%.What is the diluted EPS (rounded to the nearest cent)?

Accepted Answer

A) $1.48 
B) $1.40 
C) $1.45 
D) $1.39 
A) $1.48 
B) $1.40 
C) $1.45 
D) $1.39

Question 9

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 dividends)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 $30.Net income for the year ended December 31, 2014, was $2,200.What was FED'S 2014 basic earnings per share, rounded to the nearest cent?

Accepted Answer

A) $22.00 
B) $20.00 
C) $18.33 
D) $16.92 
A) $22.00 
B) $20.00 
C) $18.33 
D) $16.92

Question 10

You are given the following information about KER Ltd.:
30,000 common shares outstanding on January 1, 2012
2,000 shares sold on March 1, 2012
1,000 shares sold on September 1, 2012
2 for 1 Stock split recorded on October 1, 2012 Net Income for the year $340,000
Required:
Calculated the basic EPS.

Accepted Answer

WACS: @#IMG-DLM& EPS

Question 11

The diluted EPS does not have to be disclosed in the financial statements.

Accepted Answer

A) True 
 B)False

Question 12

Nonconvertible, cumulative preferred shares affect the computation of EPS (for simple capital structure), basic EPS and diluted EPS.

Accepted Answer

A) True 
 B)False

Question 13

Managers are often under pressure to increase EPS figures.As a result, they may sometimes be tempted to behave in ways that are misleading to the users of the financial statements, to the detriment of their companies and/or are unethical.Provide two examples of such behaviours.

Accepted Answer

1.Delaying the issuance of new common sh

Question 14

When computing diluted earnings per share, convertible securities are:

Accepted Answer

A) Ignored. 
B) Incorporated only if they are anti-dilutive. 
C) Incorporated whether they are dilutive or anti-dilutive. 
D) Incorporated only if they are dilutive. 
A) Ignored. 
B) Incorporated only if they are anti-dilutive. 
C) Incorporated whether they are dilutive or anti-dilutive. 
D) Incorporated only if they are dilutive.

Question 15

You are given the following information about JG Ltd.
Class A preferred shares, 1,000 shares issued and outstanding; annual dividend rate of $500 per shar cumulative, paid at the end of each quarter; each share is convertible into 40 shares of Class B common
Class B common shares, 80,000 shares issued and outstanding
There are no other senior securities
Net Income for 2012, the year of the conversion, is $1,650,000; there are no discontinued operations.All 1,000 shares of Class A are converted into 40,000 Class B shares on October 1 2012; dividends for the first three quarters of the year were fully paid.Calculate the basic EPS.

Accepted Answer

Basic: @#IMG-DLM& WACS @#IMG-DLM& Basic

Question 16

In computing the weighted average number of shares outstanding, the following is considered outstanding only as of the date issued or sold:

Accepted Answer

A) Stock dividends. 
B) Reverse stock splits. 
C) Stock splits. 
D) Common shares issued. 
A) Stock dividends. 
B) Reverse stock splits. 
C) Stock splits. 
D) Common shares issued.

Question 17

At December 31, 2013, MNO had 50,000 common shares issued and outstanding.On April 1, 2014, an additional 10,000 common shares were issued.MNO's net income for the year ended December 31, 2014, was $1,035,000.During 2014, MNO declared and paid $600,000 cash dividends on its nonconvertible preferred shares (the full year's requirement).The earnings per common share, rounded to the nearest cent, for the year ended December 31, 2014, should be:

Accepted Answer

A) $18.00. 
B) $18.84. 
C) $7.92. 
D) $7.57. 
A) $18.00. 
B) $18.84. 
C) $7.92. 
D) $7.57.

Question 18

With respect to the computation of earnings per share, which of the following would be most indicative of a simple capital structure?

Accepted Answer

A) Ownership interests consisting only of common shares 
B) Common shares, preferred shares, and convertible securities outstanding in lots of even thousands 
C) Earnings derived from one primary product segment of business 
D) Equity represented only by common and convertible preferred shares 
A) Ownership interests consisting only of common shares 
B) Common shares, preferred shares, and convertible securities outstanding in lots of even thousands 
C) Earnings derived from one primary product segment of business 
D) Equity represented only by common and convertible preferred shares

Question 19

When a midyear stock dividend increases the number of common shares outstanding for the period, the new shares resulting from the dividend are weighted by one-half a year for purposes of computing EPS.

Accepted Answer

A) True 
 B)False

Question 20

When a company has negative net income and potentially dilutive securities, the calculation of EPS results in:

Accepted Answer

A) No EPS being reported. 
B) Diluted EPS i.e.all potentially dilutive securities are included in the calculation (whether dilutive or anti-dilutive). 
C) Diluted EPS being reported and it will be more than basic EPS. 
D) None of these choices are correct. 
A) No EPS being reported. 
B) Diluted EPS i.e.all potentially dilutive securities are included in the calculation (whether dilutive or anti-dilutive). 
C) Diluted EPS being reported and it will be more than basic EPS. 
D) None of these choices are correct.

A reverse split may be used to increase the value per share of a company.

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 purchase of treasury stock.

Diluted EPS is meant to be a worst-case scenario.

Options are in-the-money if the exercise price is higher that the market value of common shares.

WXY had the following common share transactions: The weighted average number of shares outstanding for the year was: (Round your answer to nearest whole number.)

You are given the following information about KER Ltd.: 30,000 common shares outstanding on January 1, 2012 2,000 shares sold on March 1, 2012 1,000 shares sold on September 1, 2012 2 for 1 Stock split recorded on October 1, 2012 Net Income for the year $340,000 Required: Calculated the basic EPS.

The diluted EPS does not have to be disclosed in the financial statements.

Nonconvertible, cumulative preferred shares affect the computation of EPS (for simple capital structure), basic EPS and diluted EPS.

Managers are often under pressure to increase EPS figures.As a result, they may sometimes be tempted to behave in ways that are misleading to the users of the financial statements, to the detriment of their companies and/or are unethical.Provide two examples of such behaviours.

When computing diluted earnings per share, convertible securities are:

In computing the weighted average number of shares outstanding, the following is considered outstanding only as of the date issued or sold:

With respect to the computation of earnings per share, which of the following would be most indicative of a simple capital structure?

When a midyear stock dividend increases the number of common shares outstanding for the period, the new shares resulting from the dividend are weighted by one-half a year for purposes of computing EPS.

When a company has negative net income and potentially dilutive securities, the calculation of EPS results in:

Financial Liabilities and Provisions

Financial Instruments: Long-Term Debt

Shareholders Equity

Financial Instruments: Complex Debt and Equity

Corporate Income Tax

Tax Losses

Leases

Post-Employment Benefits

Accounting Changes

Financial Statement Analysis

Filters

Exam 20: Earnings Per Share

A reverse split may be used to increase the value per share of a company.

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 purchase of treasury stock.

Diluted EPS is meant to be a worst-case scenario.

Options are in-the-money if the exercise price is higher that the market value of common shares.

WXY had the following common share transactions: The weighted average number of shares outstanding for the year was: (Round your answer to nearest whole number.)

You are given the following information about KER Ltd.: 30,000 common shares outstanding on January 1, 2012 2,000 shares sold on March 1, 2012 1,000 shares sold on September 1, 2012 2 for 1 Stock split recorded on October 1, 2012 Net Income for the year $340,000 Required: Calculated the basic EPS.

The diluted EPS does not have to be disclosed in the financial statements.

Nonconvertible, cumulative preferred shares affect the computation of EPS (for simple capital structure), basic EPS and diluted EPS.

Managers are often under pressure to increase EPS figures.As a result, they may sometimes be tempted to behave in ways that are misleading to the users of the financial statements, to the detriment of their companies and/or are unethical.Provide two examples of such behaviours.

When computing diluted earnings per share, convertible securities are:

In computing the weighted average number of shares outstanding, the following is considered outstanding only as of the date issued or sold:

With respect to the computation of earnings per share, which of the following would be most indicative of a simple capital structure?

When a midyear stock dividend increases the number of common shares outstanding for the period, the new shares resulting from the dividend are weighted by one-half a year for purposes of computing EPS.

When a company has negative net income and potentially dilutive securities, the calculation of EPS results in:

Financial Liabilities and Provisions

Financial Instruments: Long-Term Debt

Shareholders Equity

Financial Instruments: Complex Debt and Equity

Corporate Income Tax

Tax Losses

Leases

Post-Employment Benefits

Accounting Changes

Financial Statement Analysis

Filters