Exam 18: Earnings Per Share

At December 31,2013,DeSoto Company had 500,000 shares of common stock outstanding.DeSoto sold 50,000 shares on October 1,2014.Net income for 2014 was $2,417,875; the income tax rate was 30%.In addition,DeSoto had the following debt and equity securities on its books on December 31,2014: (a)18,000 shares of $100 par,12% cumulative preferred stock. (b)28,000 shares of $100 par,10% cumulative preferred stock,par $100,sold at 110.Each share of preferred stock is convertible into 2 shares of common stock. (c)$2,000,000 face value of 9% bonds sold at par. (d)$3,000,000 face value of 7% convertible bonds sold to yield 8%.Unamortized bond discount is $100,000 at December 31,2014.Each $1,000 bond is convertible into 20 shares of common stock. Options to purchase 10,000 shares of common stock were issued May 1,2014. Exercise price is $30 per share; market value at date of option was $29; average market value May 1 to December 31,2014,was $40. Compute the earnings per share amounts for the year ended December 31,2014.

Earnings per share disclosures are required only for

Where in the financial statements should basic and complex EPS figures for income from continuing operations be reported?

During all of 2014 Rambler Manufacturing Company had 950,000 shares of common stock outstanding.On June 30,2014,the company issued 10,000 7 percent convertible bonds at par.The maturity value of each bond is $1,000.Each bond is convertible into 20 shares of common stock.None were converted during 2014. Rambler also had 60,000 stock warrants outstanding for all of 2014.The option price is $10 per share.The market price of the common stock was $40 on December 31,2014,and the average market price for 2014 was $30. Rambler reported a net income of $3,650,000 for 2014.Assume the company had a 40 percent income tax rate. (1)Compute the basic earnings per share. (2)Compute diluted earnings per share.

Statement of Financial Accounting Standards No.128,"Earnings Per Share," requires that earnings per share figures be presented only by companies with publicly held common stock or potential common stock. List arguments for and against the exclusion of nonpublic companies from the requirement of reporting earnings per share.

Overland,Inc.had 150,000 shares of common stock issued and outstanding at December 31,2013.On July 1,2014,an additional 25,000 shares of common stock were issued for cash.Overland also had unexercised stock options to purchase 20,000 shares of common stock at $15 per share outstanding at the beginning and end of 2014.The market price of Overland's common stock was $20 throughout 2014.What number of shares should be used in computing diluted earnings per share for the year ended December 31,2014?

On December 31,2013,Overachiever,Inc.had 500,000 shares of common stock issued and outstanding.Overachiever issued a 10 percent stock dividend on June 1,2014.On November 1,2014,Overachiever reacquired 30,000 shares of its common stock and recorded the purchase using the cost method of accounting for treasury stock.What number of shares should be used in computing basic earnings per share for the year ended December 31,2014?

On December 31,2014,Luanne Inc.had outstanding 180,000 shares of common stock.Net income for 2014 was $285,000.Outstanding options (granted July 1,2014)to purchase 15,000 shares of common stock at $20 per share had not been exercised by December 31,2014.During 2014,market prices for Luanne's common stock were: (1)Compute the basic earnings per common share in 2014. (2)Compute the diluted earnings per common share in 2014.

Gold Coast Supplies had 80,000 shares of common stock outstanding at January 1.On May 1,Gold Coasts Supplies issued 21,500 shares of common stock.Outstanding all year were 30,000 shares of nonconvertible preferred stock on which a dividend of $3 per share was paid in December.Net income for the year was $300,000.Gold Coast Supplies should report basic earnings per share for the year of

The following information relates to the capital structure of Quantico Corp.: During 2014 Quantico paid $90,000 in dividends on the preferred stock.Quantico's net income for 2014 was $1,960,000 and the income tax rate was 40 percent.For the year ended December 31,2014,the diluted earnings per share is

Under current GAAP,a company with a complex capital structure and potential earnings per share dilution must present

At December 31,2013,the Agricole Company had 600,000 shares of common stock outstanding.On September 1,2014,an additional 400,000 shares of common stock were issued.In addition,Agricole had $20,000,000 of 8 percent convertible bonds outstanding at December 31,2013,which are convertible into 400,000 shares of common stock.No bonds were converted into common stock in 2014.The net income for the year ended December 31,2014,was $7,000,000.Assuming the income tax rate was 40 percent,what should be the diluted earnings per share for the year ended December 31,2014?

The Neron Company's net income for the year ended December 31 was $30,000.During the year,Neron declared and paid $3,000 in cash dividends on preferred stock and $5,250 in cash dividends on common stock.At December 31,36,000 shares of common stock were outstanding,30,000 of which had been issued and outstanding throughout the year and 6,000 of which were issued on July 1.There were no other common stock transactions during the year,and there is no potential dilution of earnings per share.What should be the year's basic earnings per common share of Neron,rounded to the nearest penny?

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 31,2013?

In computing earnings per share,convertible preferred stock may increase the number of shares outstanding if it is

At December 31,2013,Kissit Inc.had 400,000 shares of common stock outstanding.The company also had 40,000 shares of $7 convertible preferred stock.Each share is convertible into 4 shares of common stock.(Dividends were declared and paid.) (1)Compute basic earnings (loss)per share. (2)Compute diluted earnings (loss)per share.

Which of the following is correct regarding earnings per share (EPS)?

If convertible bonds are dilutive,the interest expense added back to the numerator in calculating diluted earnings per share is

When computing diluted earnings per share,stock options are

Gabor Company had granted 20,000 options to buy one share of common stock at $10 per share to employees several years ago.The company had net income of $200,000 this year and had 300,000 shares of common stock outstanding the entire year.The average market price per share was $20 and the end of year price was $25.Given only the above information,what are basic and diluted earnings per share respectively for the year?