Question 1

A preferred dividend claim should be subtracted from income to compute basic EPS if the preferred shares are:

Accepted Answer

A)  Noncumulative, nonconvertible, and a dividend has not been declared; however, a dividend was paid this year in fulfillment of the obligation from last year's declaration. 
B)  Noncumulative, nonconvertible, and the company would like to declare a dividend; however, by law they can't because of a debit balance in the retained earnings account. 
C)  Noncumulative, nonconvertible, non-participating, and the dividend has been declared. 
D)  Participating, nonconvertible, noncumulative, and the dividend has not been declared. 
A)  Noncumulative, nonconvertible, and a dividend has not been declared; however, a dividend was paid this year in fulfillment of the obligation from last year's declaration. 
B)  Noncumulative, nonconvertible, and the company would like to declare a dividend; however, by law they can't because of a debit balance in the retained earnings account. 
C)  Noncumulative, nonconvertible, non-participating, and the dividend has been declared. 
D)  Participating, nonconvertible, noncumulative, and the dividend has not been declared.

Question 2

JUNK BONDS Inc.began operations Jan.1,2014.The following events related to common shares took place on the indicated dates during 2014. Jan.1 Issued 25,000 common shares
Apr)1 Purchased 4,000 treasury shares
May 1 Split the common shares 4-for-1
Aug)1 Issued 20,000 common shares
Dec)1 Issued a 25% stock dividend
Assuming no potentially dilutive securities,what is the weighted average shares for EPS in 2014?(Do not round intermediate calculations.Round your final answer to nearest whole number.)

Accepted Answer

A)  96,333 shares 
B)  37,917 shares 
C)  120,416 shares 
D)  118,345 shares 
A)  96,333 shares 
B)  37,917 shares 
C)  120,416 shares 
D)  118,345 shares

Question 3

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):

Accepted Answer

A)  $24.00 
B)  $25.54 
C)  $32.94 
D)  $36.71 
A)  $24.00 
B)  $25.54 
C)  $32.94 
D)  $36.71

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

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

Question 6

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

Question 7

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.)

Accepted Answer

A)  12,280 shares 
B)  10,233 shares 
C)  6,640 shares 
D)  12,080 shares 
A)  12,280 shares 
B)  10,233 shares 
C)  6,640 shares 
D)  12,080 shares

Question 8

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.

Accepted Answer

A) True 
 B)False

Question 9

WEIGHTY Inc.started the current year with 2,000 common shares issued,but only 1,500 were outstanding at that time.The following events took place during the current year: March 30 issued 200 previously unissued shares
June 1 sold 400 treasury shares
December 1 purchased 100 treasury shares
December 31 issued 500 previously unissued shares
What is WEIGHTY's denominator of earnings per share for the current year? (Do not round intermediate calculations.Round your final answer to nearest whole number.)

Accepted Answer

A)  1,917 shares 
B)  2,375 shares 
C)  1,875 shares 
D)  2,125 shares 
A)  1,917 shares 
B)  2,375 shares 
C)  1,875 shares 
D)  2,125 shares

Question 10

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

Accepted Answer

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

Question 11

EPS figures must be disclosed on the face of the financial statements for discontinued operations.

Accepted Answer

A) True 
 B)False

Question 12

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

Question 13

When computing diluted earnings per share,convertible securities are:

Accepted Answer

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

Question 14

At December 31,2014,QRS had 500 common shares issued and outstanding,400 of which had been issued and outstanding throughout the year and 100 of which were issued on October 1,2014.Net income for the year ended December 31,2014,was $4,288.What should be QRS's 2014 earnings per common share,rounded to the nearest cent?

Accepted Answer

A)  $8.58 
B)  $9.53 
C)  $10.09 
D)  $10.72 
A)  $8.58 
B)  $9.53 
C)  $10.09 
D)  $10.72

Question 15

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

Question 16

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 17

ABC Inc.has 20,000 common shares outstanding throughout the year.It also had 20,000,6 percent preferred shares,par $20,(cumulative and nonconvertible)outstanding throughout the year.Net income was $300,000.The earnings per share amount would be $13.80

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

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:

Accepted Answer

A)  Sale of additional common shares. 
B)  Issuance of stock warrants. 
C)  Purchase of treasury stock. 
D)  Declaration and issuance of stock dividend. 
A)  Sale of additional common shares. 
B)  Issuance of stock warrants. 
C)  Purchase of treasury stock. 
D)  Declaration and issuance of stock dividend.

Question 20

Company A has an EPS of $6 and Company B has an EPS of $23.Based on this information,Company B is the better investment.

Accepted Answer

A) True 
 B)False

A preferred dividend claim should be subtracted from income to compute basic EPS if the preferred shares are:

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

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

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.

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

EPS figures must be disclosed on the face of the financial statements for discontinued operations.

When computing diluted earnings per share,convertible securities are:

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

ABC Inc.has 20,000 common shares outstanding throughout the year.It also had 20,000,6 percent preferred shares,par $20,(cumulative and nonconvertible)outstanding throughout the year.Net income was $300,000.The earnings per share amount would be $13.80

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:

Company A has an EPS of $6 and Company B has an EPS of $23.Based on this information,Company B is the better investment.

The Framework for Financial Reporting

Accounting Judgements

Statements of Income and Comprehensive Income

Statements of Financial Position and Changes in Equity; Disclosure Notes

The Statement of Cash Flows

Revenue Recognition

Financial Assets: Cash and Receivables

Cost-Based Inventories and Cost of Sales

Depreciation, Amortization, and Impairment

Financial Instruments: Investments in Bonds and Equity Securities

Filters

Exam 9: Long-Lived Assets

A preferred dividend claim should be subtracted from income to compute basic EPS if the preferred shares are:

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

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

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.

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

EPS figures must be disclosed on the face of the financial statements for discontinued operations.

When computing diluted earnings per share,convertible securities are:

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

ABC Inc.has 20,000 common shares outstanding throughout the year.It also had 20,000,6 percent preferred shares,par $20,(cumulative and nonconvertible)outstanding throughout the year.Net income was $300,000.The earnings per share amount would be $13.80

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:

Company A has an EPS of $6 and Company B has an EPS of $23.Based on this information,Company B is the better investment.

The Framework for Financial Reporting

Accounting Judgements

Statements of Income and Comprehensive Income

Statements of Financial Position and Changes in Equity; Disclosure Notes

The Statement of Cash Flows

Revenue Recognition

Financial Assets: Cash and Receivables

Cost-Based Inventories and Cost of Sales

Depreciation, Amortization, and Impairment

Financial Instruments: Investments in Bonds and Equity Securities

Filters