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Comment by CPAnet on November 14, 2012 at 9:14am

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Comment by CPAnet on February 25, 2011 at 10:26pm

CPAexcel Pop Quiz #194 — FAR
Earnings Per Share: Diluted Earnings Per Share

Question 1:

A firm with a net income of $30,000 and weighted average actual shares outstanding of 15,000 for the year also had the following two securities outstanding the entire year: (1) 2,000 options to purchase one share of stock for $12 per share. The average share price during the year was $20, (2) cumulative convertible preferred stock with an annual dividend commitment of $4,500. Total common shares issued on conversion are 2,900. Compute diluted EPS for this firm.

A. $1.70
B. $1.60
C. $1.55
D. $1.61

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Question 2:

A firm has basic earnings per share of $1.29. If the tax rate is 30%, which of the following securities would be dilutive?

A. Cumulative 8%, $50 par preferred stock.

B. Ten percent convertible bonds, issued at par, with each $1,000 bond convertible into 20 shares of common stock.

C. Seven percent convertible bonds, issued at par, with each $1,000 bond convertible into 40 shares of common stock.

D. Six percent, $100 par cumulative convertible preferred stock, issued at par, with each preferred share convertible into four shares of common stock.

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Question 3:

Ian Co. is calculating earnings per share amounts for inclusion in the Ian's annual report to shareholders. Ian has obtained the following information from the controller's office as well as shareholder services:

Net income from January 1 to December 31	$125,000
Number of outstanding shares:
January 1 to March 31	15,000
April 1 to May 31	12,500
June 1 to December 31	17,000

In addition, Ian has issued 10,000 incentive stock options with an exercise price of $30 to its employees and a year-end market price of $25 per share. What amount is Ian's diluted earnings per share for the year ended December 31?

A. $4.63
B. $4.85
C. $7.35
D. $7.94

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Question 4:

The treasury stock method of entering stock options into the calculation of diluted EPS:

A. Is used only for dilutive treasury stock.

B. Computes the increase in common shares outstanding from assumed exercise of options to be the number of shares under option.

C. Is called the treasury stock method because the proceeds from assumed exercise are assumed to be used to purchase treasury stock.

D. Assumes the treasury shares are purchased at year-end.

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Question 5:

 

A firm has nonconvertible cumulative preferred stock outstanding all year. The firm also reports all eight required per share amounts because both discontinued operations and extraordinary items are reported. The computation for how many of the eight EPS amounts reflects a subtraction for preferred dividends?

A. 2
B. 4
C. 0
D. 8

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Did you get 100%?  Which questions, if any, did you miss & why?  Solutions available here for a limited time.

Comment by CPAnet on March 3, 2010 at 9:40am

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