Exam 9: Long-Lived Assets

Assume basic EPS has been determined.In determining the diluted earnings per share,the annual dividend on convertible cumulative preferred shares,which are a dilutive convertible security,should be:

Earnings per share is computed on the basis of:

Option adjustments are based on the treasury stock method.

In computing EPS for a simple capital structure,net income is reduced by cumulative preferred dividends on nonconvertible preferred shares,whether dividends are declared or not.

At December 31,2014 and 2013,GHI had 90 common shares and 20 convertible preferred shares outstanding,in addition to 9% convertible bonds payable in the face amount of $4,000.During 2014,GHI paid dividends of $2.50 per share on the preferred shares (the annual requirement).The preferred shares are convertible into 20 common shares.The 9% convertible bonds are convertible into 30 common shares.Net income for 2014 was $1,940.Assume an income tax rate of 40%.The earnings per share amounts would be: (Rounded to the nearest cent)

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

Assume basic EPS has been determined.In determining the diluted earnings per share,the annual dividend on convertible noncumulative preferred shares,which are a dilutive convertible security,should be:

The reported diluted earnings per share figure may be:

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

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.

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

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

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

RST's net income for the year ended December 31,2014,was $30,000.During 2014,RST declared and paid $3,000 cash dividends on preferred shares (the full year's requirement)and $5,250 cash dividends on common shares.At December 31,2014,36,000 common shares were issued and outstanding,30,000 of which had been outstanding throughout the year and 6,000 of which were issued on July 1,2014.No other common share transactions were completed during the year,and there is no potential dilution of earnings per share.The 2014 earnings per common share of RST,rounded to the nearest cent,should be:

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

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

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: $____________________________

Which of the following statements is correct?

A firm had 8,000 common shares outstanding at the end of the current period and earned $8,000 that period (net of tax).Also,options to purchase 5,000 shares at $5 each were outstanding all year.For the entire year the firm had $20,000 of 6% debt and $10,000 of 8% debt outstanding.The 8% debt is convertible into 500 common shares.The firm earns interest at 7 percent and has a 50 percent tax rate.The diluted earnings per share for the current year should be (rounded to the nearest cent):

At December 31,2013,BCD had 700 common shares outstanding.On September 1,2014,an additional 300 common shares were issued.In addition,BCD had $20,000 of 8 percent convertible bonds outstanding December 31,2013,which are convertible into 400 common shares.No bonds were converted into common shares in 2014.Net income for the year ended December 31,2014,was $6,000.Assuming the income tax rate was 50 percent,what should be the diluted earnings per share for the year ended December 31,2014?