Question 1

In calculating earning per share,stock options warrants,and rights are

Accepted Answer

A) always dilutive. 
B) never dilutive. 
C) dilutive if the exercise price is less than the average market price of the common stock. 
D) dilutive if the exercise price is more than the average market price of the common stock. 
A) always dilutive. 
B) never dilutive. 
C) dilutive if the exercise price is less than the average market price of the common stock. 
D) dilutive if the exercise price is more than the average market price of the common stock. C

Question 2

The EPS computation that is forward-looking and based on assumptions about future transactions is

Accepted Answer

A) basic EPS. 
B) diluted EPS. 
C) continuing operations EPS. 
D) extraordinary EPS. 
A) basic EPS. 
B) diluted EPS. 
C) continuing operations EPS. 
D) extraordinary EPS. B

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

Accepted Answer

A) declaration and issuance of a stock dividend. 
B) purchase of treasury stock. 
C) sale of additional common stock. 
D) issuance of stock warrants. 
A) declaration and issuance of a stock dividend. 
B) purchase of treasury stock. 
C) sale of additional common stock. 
D) issuance of stock warrants. A

Question 4

Of the following,select the incorrect statement concerning earnings per share.

Accepted Answer

A) During periods when all income is paid out as dividends, earnings per share and dividends per share under a simple capital structure would be identical. 
B) Under a simple capital structure, no adjustment to shares outstanding is necessary for a stock split on the last day of the fiscal period. 
C) During a period, changes in stock issued or reacquired by a company may affect earnings per share. 
D) During a loss period, the amount of loss attributed to each share of common stock should be computed. 
A) During periods when all income is paid out as dividends, earnings per share and dividends per share under a simple capital structure would be identical. 
B) Under a simple capital structure, no adjustment to shares outstanding is necessary for a stock split on the last day of the fiscal period. 
C) During a period, changes in stock issued or reacquired by a company may affect earnings per share. 
D) During a loss period, the amount of loss attributed to each share of common stock should be computed.

Question 5

Earnings per share information should be reported for all of the following except

Accepted Answer

A) continuing operations. 
B) extraordinary gain. 
C) net income. 
D) cash flows from operating activities. 
A) continuing operations. 
B) extraordinary gain. 
C) net income. 
D) cash flows from operating activities.

Question 6

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

Accepted Answer

A) $19.30 
B) $20.00 
C) $20.20 
D) $18.33 
A) $19.30 
B) $20.00 
C) $20.20 
D) $18.33

Question 7

The price-earnings ratio frequently is used by analysts and investors for evaluating stock prices because it relates the earnings of the business to the current market price of the stock.The ratio is computed by dividing the market price per share by the earnings per share before extraordinary items.
Explain how the price-earnings ratio should be interpreted,including any problems associated with the interpretation of the ratio.

Accepted Answer

A stock selling at a high price-earnings

Question 8

When computing diluted EPS for a company with a complex capital structure,what is the denominator in the computation?

Accepted Answer

A) Number of common shares outstanding at year-end 
B) Weighted-average number of common shares outstanding 
C) Weighted-average number of common shares outstanding plus all other potentially antidilutive securities 
D) Weighted-average number of common shares outstanding plus all other potentially dilutive securities 
A) Number of common shares outstanding at year-end 
B) Weighted-average number of common shares outstanding 
C) Weighted-average number of common shares outstanding plus all other potentially antidilutive securities 
D) Weighted-average number of common shares outstanding plus all other potentially dilutive securities

Question 9

Which combination is the correct statement regarding disclosure requirements for earnings per share?

Accepted Answer

A) Only the EPS figure for net income must be presented and it must appear on the face of the income statement. 
B) Income from continuing operations and net income may be presented on the face of the income statement or in the notes. 
C) Income from continuing operations and net income are required to be presented on the face of the income statement; presentation of EPS amounts for extraordinary items and discontinued operations is optional. 
D) Income from continuing operations and net income are both required to be presented on the face of the income statement; presentation of EPS amounts for extraordinary items and discontinued operations may be presented on the face of the income statement or in the notes. 
A) Only the EPS figure for net income must be presented and it must appear on the face of the income statement. 
B) Income from continuing operations and net income may be presented on the face of the income statement or in the notes. 
C) Income from continuing operations and net income are required to be presented on the face of the income statement; presentation of EPS amounts for extraordinary items and discontinued operations is optional. 
D) Income from continuing operations and net income are both required to be presented on the face of the income statement; presentation of EPS amounts for extraordinary items and discontinued operations may be presented on the face of the income statement or in the notes.

Question 10

The Mountain Range Railway Company operates a regional railroad in the states of Colorado,New Mexico,and Arizona.Mountain Range reported the following information (dollar amounts in thousands)in its December 31,2014,consolidated statement of income:
   
Required:
1.Estimate the average number of common shares outstanding for 2014.Assume Mountain Range has outstanding the entire year $108,000 of $2 preferred stock,par value $2.50 (five million shares authorized).The stock is not convertible.Indicate any assumptions you make in your calculations.
2.Does Mountain Range have a simple or complex capital structure?
3.Is Mountain Range required to report earnings per share figures for extraordinary items and discontinued operations,if present,in its income statement?

Accepted Answer

@#IMG-DLM& 
2.Mountain Range has a simple capital

Question 11

Assume a company had net income of $20,000 and 8,000 shares of common stock outstanding the entire year.Also assume there were two potentially dilutive issues outstanding for the entire year:
 
What is diluted earnings per share for this company for the year?

Accepted Answer

A) $2.50 
B) $2.40 
C) $2.11 
D) $2.00 
A) $2.50 
B) $2.40 
C) $2.11 
D) $2.00

Question 12

The main purpose of reporting diluted earnings per share is to

Accepted Answer

A) provide a comparison figure for debt holders. 
B) indicate earnings shareholders will receive in future periods. 
C) distinguish between companies with a complex capital structure and companies with a simple capital structure. 
D) show the maximum possible dilution of earnings. 
A) provide a comparison figure for debt holders. 
B) indicate earnings shareholders will receive in future periods. 
C) distinguish between companies with a complex capital structure and companies with a simple capital structure. 
D) show the maximum possible dilution of earnings.

Question 13

At December 31,2013,Nightstyle Inc.had 190,000 shares of common stock outstanding.On October 1,2014,an additional 70,000 shares of common stock were issued for cash.Nightstyle also had 2,000,000 of 8 percent convertible bonds outstanding at December 31,2014,which are convertible into 55,000 shares of common stock.The bonds are dilutive in the 2014 earnings per share computation.No bonds were issued or converted into common stock during 2014.What is the number of shares that should be used in computing diluted earnings per share for the year ended December 31,2014?

Accepted Answer

A) 160,000 
B) 175,000 
C) 205,000 
D) 262,500 
A) 160,000 
B) 175,000 
C) 205,000 
D) 262,500

Question 14

For companies with a complex capital structure,a convertible security is potentially dilutive if its incremental EPS is

Accepted Answer

A) greater than basic EPS after considering any stock options, rights, and warrants. 
B) less than basic EPS after considering any stock options, rights, and warrants. 
C) equal to basic EPS after considering any stock options, rights, and warrants. 
D) less than 1.00 after considering any stock options, rights, and warrants. 
A) greater than basic EPS after considering any stock options, rights, and warrants. 
B) less than basic EPS after considering any stock options, rights, and warrants. 
C) equal to basic EPS after considering any stock options, rights, and warrants. 
D) less than 1.00 after considering any stock options, rights, and warrants.

Question 15

In applying the treasury stock method of computing diluted earnings per share,when is it appropriate to use the average market price of common stock during the year as the assumed repurchase price?

Accepted Answer

A) Always 
B) Never 
C) When the average market price is lower than the exercise price 
D) When the average market price is higher than the exercise price 
A) Always 
B) Never 
C) When the average market price is lower than the exercise price 
D) When the average market price is higher than the exercise price

Question 16

What is the correct treatment of a stock dividend issued in mid-year when computing the weighted-average number of common shares outstanding for earnings per share purposes?

Accepted Answer

A) The stock dividend should be weighted by the length of time that the additional number of shares are outstanding during the period. 
B) The stock dividend should be included in the weighted-average number of common shares outstanding only if the additional shares result in a decrease of 3 percent or more in earnings per share. 
C) The stock dividend should be weighted as if the additional shares were issued at the beginning of the year. 
D) The stock dividend should be ignored since no additional capital was received. 
A) The stock dividend should be weighted by the length of time that the additional number of shares are outstanding during the period. 
B) The stock dividend should be included in the weighted-average number of common shares outstanding only if the additional shares result in a decrease of 3 percent or more in earnings per share. 
C) The stock dividend should be weighted as if the additional shares were issued at the beginning of the year. 
D) The stock dividend should be ignored since no additional capital was received.

Question 17

During its fiscal year,Deerborn Distributing had net income of $100,000 (no extraordinary items)and 50,000 shares of common stock and 10,000 shares of preferred stock outstanding.Deerborn declared and paid dividends of $.50 per share to common and $6.00 per share to preferred.The preferred stock is convertible into common stock on a share-for-share basis.For the year,Deerborn Distributing should report diluted earnings (loss)per share of

Accepted Answer

A) $(0.80). 
B) $1.00. 
C) $1.67. 
D) $2.67. 
A) $(0.80). 
B) $1.00. 
C) $1.67. 
D) $2.67.

Question 18

Carbondale Enterprises had 200,000 shares of common stock issued and outstanding at December 31,2013.On July 1,2014,Carbondale issued a 10 percent stock dividend.Unexercised stock options to purchase 40,000 shares of common stock (adjusted for the 2014 stock dividend)at $20 per share were outstanding at the beginning and end of 2014.The market price of Carbondale's common stock (which was not affected by the stock dividend)was $25 per share during 2014.Net income for the year ended December 31,2014,was $1,100,000.What should be Carbondale's 2014 diluted earnings per common share,rounded to the nearest penny?

Accepted Answer

A) $5.00 
B) $5.05 
C) $4.82 
D) $4.23 
A) $5.00 
B) $5.05 
C) $4.82 
D) $4.23

Question 19

During 2014,the Laverne Corporation had 370,000 shares of $20 par common stock outstanding.On January 1,2014,2,000,8 percent bonds were issued with a maturity value of $1,000 each.To enhance the bond sale,the company offered a conversion of 50 shares of common stock for each bond at the option of the purchaser.Net income for 2014 was $464,000.The income tax rate was 30 percent.Compute the diluted earnings per share of common stock.

Accepted Answer

The answer of During 2014,the Laverne Corporation had 370,000 shares...

Question 20

When a company with a complex capital structure has a loss from continuing operations and potentially dilutive securities,the calculation of earning per share (EPS)results in

Accepted Answer

A) simple EPS (no potentially dilutive securities are included in the calculation). 
B) no EPS being reported. 
C) EPS being reported, using the same calculation of dilutive EPS as would be used if net income were positive. 
D) EPS being reported, using securities in the calculation of dilutive EPS that would be anti-dilutive if income were positive. 
A) simple EPS (no potentially dilutive securities are included in the calculation). 
B) no EPS being reported. 
C) EPS being reported, using the same calculation of dilutive EPS as would be used if net income were positive. 
D) EPS being reported, using securities in the calculation of dilutive EPS that would be anti-dilutive if income were positive.

In calculating earning per share,stock options warrants,and rights are

The EPS computation that is forward-looking and based on assumptions about future transactions is

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

Of the following,select the incorrect statement concerning earnings per share.

Earnings per share information should be reported for all of the following except

When computing diluted EPS for a company with a complex capital structure,what is the denominator in the computation?

Which combination is the correct statement regarding disclosure requirements for earnings per share?

Assume a company had net income of $20,000 and 8,000 shares of common stock outstanding the entire year.Also assume there were two potentially dilutive issues outstanding for the entire year: What is diluted earnings per share for this company for the year?

The main purpose of reporting diluted earnings per share is to

For companies with a complex capital structure,a convertible security is potentially dilutive if its incremental EPS is

In applying the treasury stock method of computing diluted earnings per share,when is it appropriate to use the average market price of common stock during the year as the assumed repurchase price?

What is the correct treatment of a stock dividend issued in mid-year when computing the weighted-average number of common shares outstanding for earnings per share purposes?

When a company with a complex capital structure has a loss from continuing operations and potentially dilutive securities,the calculation of earning per share (EPS)results in

Financial Reporting

A Review of the Accounting Cycle

The Balance Sheet and Notes to the Financial Statements

The Income Statement

Statement of Cash Flows and Articulation

Earnings Management

The Revenuereceivablescash Cycle

Revenue Recognition

Inventory and Cost of Goods Sold

Investments in Noncurrent Operating Assets-Acquisition

Investments in Noncurrent Operating Assets-Utilization and Retirement

Debt Financing

Equity Financing

Investments in Debt and Equity Securities

Leases

Income Taxes

Employee Compensation-Payroll,pensions, Other Compissues

Derivatives, contingencies, business Segments, and Interim Reports

Accounting Changes and Error Corrections

Statement of Cash Flows Revisited

Accounting in a Global Market

Analysis of Financial Statements

Filters

Exam 18: Earnings Per Share

In calculating earning per share,stock options warrants,and rights are

The EPS computation that is forward-looking and based on assumptions about future transactions is

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

Of the following,select the incorrect statement concerning earnings per share.

Earnings per share information should be reported for all of the following except

When computing diluted EPS for a company with a complex capital structure,what is the denominator in the computation?

Which combination is the correct statement regarding disclosure requirements for earnings per share?

Assume a company had net income of $20,000 and 8,000 shares of common stock outstanding the entire year.Also assume there were two potentially dilutive issues outstanding for the entire year: What is diluted earnings per share for this company for the year?

The main purpose of reporting diluted earnings per share is to

For companies with a complex capital structure,a convertible security is potentially dilutive if its incremental EPS is

In applying the treasury stock method of computing diluted earnings per share,when is it appropriate to use the average market price of common stock during the year as the assumed repurchase price?

What is the correct treatment of a stock dividend issued in mid-year when computing the weighted-average number of common shares outstanding for earnings per share purposes?

When a company with a complex capital structure has a loss from continuing operations and potentially dilutive securities,the calculation of earning per share (EPS)results in

Financial Reporting

A Review of the Accounting Cycle

The Balance Sheet and Notes to the Financial Statements

The Income Statement

Statement of Cash Flows and Articulation

Earnings Management

The Revenuereceivablescash Cycle

Revenue Recognition

Inventory and Cost of Goods Sold

Investments in Noncurrent Operating Assets-Acquisition

Investments in Noncurrent Operating Assets-Utilization and Retirement

Debt Financing

Equity Financing

Investments in Debt and Equity Securities

Leases

Income Taxes

Employee Compensation-Payroll,pensions, Other Compissues

Derivatives, contingencies, business Segments, and Interim Reports

Accounting Changes and Error Corrections

Statement of Cash Flows Revisited

Accounting in a Global Market

Analysis of Financial Statements

Filters