Exam 18: Earnings Per Share

At December 31, 2013, Rightoff, Inc. had 600,000 shares of common stock outstanding. On April 1, 2014, an additional 180,000 shares of common stock were issued for cash. Rightoff also had $5,000,000 of 8% convertible bonds outstanding at December 31, 2013, which are convertible into 150,000 shares of common stock. The bonds are dilutive in the 2014 EPS computation. No bonds were issued or converted into common stock during 2014. -Using the information above,what is the number of shares that should be used in computing basic earnings per share for 2014?

The following information applies to the next three questions: Tangier Corporation currently has stock rights outstanding for 2,000 common shares. The exercise price of these shares is $25. The options were issued in January of 2012. The average market price of the related common stock during the year 2012 was $30. The average market price of the related common stock during 2013 was $26 and during 2014 was $21. The company's fiscal year ends on December 31 of each year. -How should these stock rights be treated in the earnings per share calculation for the year ending December 31,2014?

Which of the following is correct regarding the effect that dilutive convertible bonds have on the earnings per share computation?

Basic earnings per share represents the amount of earnings attributable to

During 2014,Belladonna Corp.had outstanding 125,000 shares of common stock and 7,500 shares of noncumulative,8 percent,$50 par preferred stock.Each preferred share is convertible into 8 shares of common stock.In 2014,net income was $231,500. (1)Compute basic and diluted earnings per share for 2014 assuming no dividends were declared or paid. (2)Compute basic and diluted earnings per share for 2014 assuming dividends were declared and paid on the preferred stock.

Warrants exercisable at $15 each to obtain 25,000 shares of common stock were outstanding during a period when the average and year-end market price of the common stock was $30.Application of the treasury stock method for the assumed exercise of these warrants in computing diluted earnings per share will increase the weighted-average number of outstanding common shares by

Lamonde Corporation has 20,000 shares of common stock and 5,000 shares of preferred stock outstanding during 2014.Lamonde reported net income of $60,000 for 2014.Each share of preferred stock is convertible into two shares of common stock.The preferred stock is entitled to a noncumulative annual dividend of $5 per share.After the common stock has been paid a dividend of $1 per share,the preferred stock participates in any additional dividends on a 2:3 per share ratio with the common.For 2014,the common shareholders have been paid $25,000 (or $1.25 per share),and the preferred shareholders have been paid $25,000 (or $5.00 per share). Required: Calculate basic earnings per share under the two-class method for 2014.

For a company having several different issues of convertible securities and/or stock options and warrants,the FASB requires selection of the combination of securities producing

The Granger Corporation had 200,000 shares of common stock and 10,000 shares of cumulative,$6 preferred stock outstanding during 2014.The preferred stock is convertible at the rate of three shares of common per share of preferred.For 2014,the company had a $60,000 net loss from operations and declared no dividends.Granger should report 2014 diluted loss per share of (rounded to the nearest cent)

Which earnings per share computation should be reported on the face of the income statement?

Azul Incorporated has 3,500,000 shares of common stock outstanding on December 31,2013.An additional 400,000 shares of common stock were issued April 1,2014,and 150,000 more on July 1,2014.On October 1,2014,Azul issued 5,000,$1,000 face value,7 percent convertible bonds.Each bond is convertible into 40 shares of common stock.No bonds were converted into common stock in 2014.What is the number of shares to be used in computing basic earnings per share and diluted earnings per share,respectively?

The Simonson Corp.provides the following data for 2014: The net income for 2014 is $2,300,000.The Simonson's tax rate is 30 percent.No conversions or options were exercised during 2014. (1)Compute basic earnings per share. (2)Compute diluted earnings per share.

Snyder Home Products,a manufacturer of sinks,bath tubs,and faucets,reported the following information (all dollar amounts in thousands of dollars)for December 31,2014,in a draft version of its consolidated statement of income: Required: 1.Estimate the average number of common shares outstanding for 2014.Assume that company has outstanding the entire year $108 thousand of $2 convertible preferred stock,par value $2.50,five million shares authorized.Indicate any assumptions you make. 2.Does Snyder have a simple or complex capital structure? 3.Why is only one earnings per share figure reported for Snyder? 4.Is Snyder required to show the $1.22 and ($.23)amounts?

Leshner Corporation began business on January 1,2014.Due to difficulties in beginning operations,the company issued 50 shares of common stock (par $10)on January 1,2014,to the organizers.Twenty additional shares were also sold on that date.The following also occurred during the year 2014: The weighted average number of shares outstanding for 2014 was

The income statement of Faster Computers,Inc.showed the following information on December 31,2014. Compute earnings per share figures for common stock under the assumption that Faster Computer Inc.has (1)320,000 shares of $24 par value common stock outstanding. (2)9,600 shares of $100,par 8% cumulative preferred stock,and 240,000 shares of no-par common stock.Dividends are not in arrears. Note: Assumption (1)is independent of (2).

A company already has calculated its basic earnings per share (EPS).In determining diluted earnings per share,the annual dividend on convertible cumulative preferred stock which is dilutive should be

At December 31, 2013, Rightoff, Inc. had 600,000 shares of common stock outstanding. On April 1, 2014, an additional 180,000 shares of common stock were issued for cash. Rightoff also had $5,000,000 of 8% convertible bonds outstanding at December 31, 2013, which are convertible into 150,000 shares of common stock. The bonds are dilutive in the 2014 EPS computation. No bonds were issued or converted into common stock during 2014. -Using the information above,what is the number of shares that should be used in computing diluted earnings per share for 2014?

You are an independent CPA and have just acquired a new client,Lambert Manufacturing Company.The president of the company recently read an article advising a firm's management team to seek to maximize the long-run value of the firm's stock.The article mentioned profit maximization,earnings per share,and the role of these two factors in stock price maximization.The president wants your advice on how the choice of inventory cost flow methods (e.g.,FIFO vs.LIFO)relates to profit maximization,earnings per share,and stock price maximization.

When computing earnings per share on common stock,dividends on cumulative,nonconvertible preferred stock should be

The 2014 net income of Beguile Inc.was $200,000 and 100,000 shares of its common stock were outstanding during the entire year.In addition,there were outstanding options to purchase 10,000 shares of common stock at $10 per share.These options were granted in 2011 and none had been exercised by December 31,2014.Market prices of Beguile's common stock during 2014 were The amount that should be shown as Beguile's diluted earnings per share for 2014 (rounded to the nearest cent)is