Exam 19: Share-Based Compensation and Earnings Per Share

On December 31,2015,Vitners Company had outstanding 400,000 shares of common stock and 40,000 shares of 8% cumulative preferred stock (par $10). February 28,2016,issued an additional 36,000 shares of common stock September 1,2016,9,000 shares were retired. A 10% stock dividend was declared and distributed on July 1,2016. At year-end,there were fully vested incentive stock options outstanding for 30,000 shares of common stock (adjusted for the stock dividend).The exercise price was $18.The market price of the common stock averaged $20 during the year.Also outstanding were $1,000,000 face amount of 10% convertible bonds issued in 2013 and convertible into 50,000 common shares (adjusted for the stock dividend).Net income was $900,000.The tax rate for the year was 40%. Required: Compute basic and diluted EPS (rounded to 2 decimal places)for the year ended December 31,2016.

When we take into account the dilutive effect of convertible securities in the calculation of EPS,the method used is called the:

If unexpected turnover in 2017 caused the company to estimate that 10% of the options would be forfeited,what amount should M recognize as compensation expense for 2017?

The Santiago Corporation provides an executive stock option plan.Under the plan,the company granted options on January 1,2016,that permit executives to acquire 70 million of the company's $1 par value common shares within the next eight years,but not before December 31,2019 (the vesting date).The exercise price is the market price of the shares on the date of the grant,$27 per share.The fair value of the options,estimated by an appropriate option pricing model,is $4 per option.No forfeitures are anticipated.Ignore taxes. Required: 1.Determine the total compensation cost pertaining to the options. 2.Prepare the appropriate journal entry (if any)to record the award of options on January 1,2016. 3.Prepare the appropriate journal entry (if any)to record compensation expense on December 31,2016.

GAAP requires using intrinsic value accounting for employee stock options.

Except for tax considerations the potentially dilutive effect of convertible preferred stock is handled in EPS calculations in much the same way as convertible debt.

Which of the following is a correct statement concerning earnings per share?

Dulce Corporation had 200,000 shares of common stock outstanding during the current year.There were also fully vested options for 10,000 shares of common stock were granted with an exercise price of $20.The market price of the common stock averaged $25 for the year.Net income was $4 million.What is diluted EPS (rounded)?

On January 1,2016,Albacore Company had 300,000 shares of its common stock issued and outstanding.Albacore issued a 10% stock dividend on July 1,2016.On October 1,2016,Albacore retired 12,000 of its common shares.When calculating basic earnings per share for 2016,what is the appropriate number of shares for Albacore to use in the denominator of the EPS fraction?

What is Rudyard's diluted EPS (rounded)?

The calculation of diluted earnings per share assumes that stock options were exercised and that the proceeds were used to:

When a company's income statement includes discontinued operations and a gain on the sale of machinery,the company should report per share information on:

Basic earnings per share is computed using:

Restricted stock units (RSUs):

Listed below are five terms followed by a list of phrases that describe or characterize each of the terms.Match each phrase with the number for the correct term.

If a company reports discontinued operations,EPS must be disclosed for both income from continuing operations and net income.

Getaway Travel Company reported net income for 2016 in the amount of $50,000.During 2016,Getaway declared and paid $2,000 in cash dividends on its nonconvertible preferred stock.Getaway also paid $10,000 cash dividends on its common stock.Getaway had 40,000 common shares outstanding from January 1 until 10,000 new shares were sold for cash on July 1,2016.A 2-for-1 stock split was granted on July 5,2016.What is the 2016 basic earnings per share (rounded)?

Green Company is a calendar-year U.S.firm with operations in several countries.At January 1,2016,the company had issued 40,000 executive stock options permitting executives to buy 40,000 shares of stock for $25.The vesting schedule is 20% the first year,30% the second year,and 50% the third year (graded-vesting).The fair value of the options is estimated as follows: Assuming Green uses the straight-line method,what is the compensation expense related to the options to be recorded in 2017?

XYZ paid $10,000 in dividends in January of the current year to its preferred shareholders.The preferred stock is nonconvertible and noncumulative.The dividend: