earnings per share

MULTIPLE CHOICE—Earnings Per Share, Conceptual

Answer No. Descriptionc 82. Simple capital structure.d 83. Computing EPS for a simple capital structure.d 84. Computation of weighted-average shares outstanding.c 85. Effect of treasury stock on EPS.b S86. Reporting EPS by companies.b P87. Diluted EPS and conversion of bonds.d 88. Diluted EPS.b 89. Dilutive convertible securities.a 90. Cumulative convertible preferred stock income adjustment.d 91. Treasury stock method.a 92. Treasury stock method.b 93. Treasury stock method.d 94. Antidilutive securities.d *95. EPS calculation with two dilutive convertible securities.

MULTIPLE CHOICE—Earnings Per Share, ComputationalAnswer No. Description

c 96. Weighted average number of common shares outstanding.c 97. Weighted average number of common shares outstanding.b 98. Weighted average number of common shares outstanding.b 99. Weighted average number of shares outstanding.c 100. Determination of shares used in computing EPS.a 101. Computation of earnings per share.c 102. Basic EPS with convertible preferred stock.c 103. EPS and a stock split.d 104. Weighted average number of common shares outstanding.b 105. Diluted EPS and the treasury stock method.b 106. Diluted EPS with convertible bonds.c 107. Diluted EPS and contingent issuances.d 108. Basic EPS.c 109. Diluted EPS with convertible bonds and preferred stock.d 110. Number of shares in computing diluted EPS.c 111. Diluted EPS.c 112. EPS and contingent issuances.b 113. Diluted EPS with convertible bonds.c 114. Diluted EPS with convertible bonds.b 115. Diluted EPS with convertible bonds.b 116. Diluted EPS.d 117. Basic EPS with convertible bonds and convertible preferred stock.

MULTIPLE CHOICE—Earnings Per Share, Computational (cont.)Answer No. Description

c 118. Diluted EPS.b 119. Denominator in computing basic EPS and DEPS with convertible bonds.b 120. Shares outstanding for basic EPS and DEPS.b 121. Basic EPS with convertible preferred stock.c 122. Diluted EPS with convertible bonds.

a 123. Basic EPS and DEPS with convertible bonds issued during year.c 124. Basic EPS with convertible preferred stock and convertible bonds.b 125. DEPS with convertible preferred stock and convertible bonds.c 126. DEPS and the treasury stock method.d 127. DEPS using the treasury stock method.

MULTIPLE CHOICE—Earnings Per Share, CPA Adapted

Answer No. Descriptionb 128. Determine earnings per common share.b 129. Determine earnings per common share.d 130. Determine diluted EPS.b 131. Number of shares to calculate diluted EPS.b 132. DEPS with convertible securities.d 133. Effect of dividends on nonconvertible preferred stock.a 134. "If converted" method.

MULTIPLE CHOICE—Earnings Per Share—Conceptual

82. With respect to the computation of earnings per share, which of the following would be most indicative of a simple capital structure?a. Common stock, preferred stock, and convertible securities outstanding in lots of even

thousandsb. Earnings derived from one primary line of businessc. Ownership interest consisting solely of common stockd. None of these

83. In computing earnings per share for a simple capital structure, if the preferred stock is cumulative, the amount that should be deducted as an adjustment to the numerator (earnings) is thea. preferred dividends in arrears.b. preferred dividends in arrears times (one minus the income tax rate).c. annual preferred dividend times (one minus the income tax rate).d. none of these.

84. In computations of weighted average of shares outstanding, when a stock dividend or stock split occurs, the additional shares area. weighted by the number of days outstanding.b. weighted by the number of months outstanding.c. considered outstanding at the beginning of the year.d. considered outstanding at the beginning of the earliest year reported.

85. What effect will the acquisition of treasury stock have on stockholders' equity and earnings per share, respectively?a. Decrease and no effectb. Increase and no effectc. Decrease and increased. Increase and decrease

S86. Due to the importance of earnings per share information, it is required to be reported by all

Public Companies Nonpublic Companiesa. Yes Yesb. Yes Noc. No Nod. No Yes

P87. A convertible bond issue should be included in the diluted earnings per share computation as if the bonds had been converted into common stock, if the effect of its inclusion is

Dilutive Antidilutivea. Yes Yesb. Yes Noc. No Yesd. No No

88. When computing diluted earnings per share, convertible bonds area. ignored.b. assumed converted whether they are dilutive or antidilutive.c. assumed converted only if they are antidilutive.d. assumed converted only if they are dilutive.

89. Dilutive convertible securities must be used in the computation ofa. basic earnings per share only.b. diluted earnings per share only.c. diluted and basic earnings per share.d. none of these.

90. In computing earnings per share, the equivalent number of shares of convertible preferred stock are added as an adjustment to the denominator (number of shares outstanding). If the preferred stock is cumulative, which amount should then be added as an adjustment to the numerator (net earnings)?a. Annual preferred dividendb. Annual preferred dividend times (one minus the income tax rate)c. Annual preferred dividend times the income tax rated. Annual preferred dividend divided by the income tax rate

91. In the diluted earnings per share computation, the treasury stock method is used for options and warrants to reflect assumed reacquisition of common stock at the average market price during the period. If the exercise price of the options or warrants exceeds the average market price, the computation woulda. fairly present diluted earnings per share on a prospective basis.b. fairly present the maximum potential dilution of diluted earnings per share on a

prospective basis.c. reflect the excess of the number of shares assumed issued over the number of

shares assumed reacquired as the potential dilution of earnings per share.d. be antidilutive.

92. In applying the treasury stock method to determine the dilutive effect of stock options and warrants, the proceeds assumed to be received upon exercise of the options and warrantsa. are used to calculate the number of common shares repurchased at the average

market price, when computing diluted earnings per share.b. are added, net of tax, to the numerator of the calculation for diluted earnings per

share.c. are disregarded in the computation of earnings per share if the exercise price of the

options and warrants is less than the ending market price of common stock.d. none of these.

93. When applying the treasury stock method for diluted earnings per share, the market price of the common stock used for the repurchase is thea. price at the end of the year.b. average market price.c. price at the beginning of the year.d. none of these.

94. Antidilutive securitiesa. should be included in the computation of diluted earnings per share but not basic

earnings per share.b. are those whose inclusion in earnings per share computations would cause basic

earnings per share to exceed diluted earnings per share.c. include stock options and warrants whose exercise price is less than the average

market price of common stock.d. should be ignored in all earnings per share calculations.

*95. Assume there are two dilutive convertible securities. The one that should be used first to recalculate earnings per share is the security with thea. greater earnings adjustment.b. greater earnings per share adjustment.c. smaller earnings adjustment.d. smaller earnings per share adjustment.

Multiple Choice Answers—Earnings Per Share—Conceptual

Item Ans. Item Ans. Item Ans. Item Ans. Item Ans. Item Ans. Item Ans.

82. c 84. d 86. b 88. d 90. a 92. a 94. d83. d 85. c 87. b 89. b 91. d 93. b *95. d

Solution to Multiple Choice question for which the answer is “none of these.”

83. annual preferred dividend.

MULTIPLE CHOICE—Earnings Per Share—Computational

96. Hill Corp. had 600,000 shares of common stock outstanding on January 1, issued 900,000 shares on July 1, and had income applicable to common stock of $1,050,000 for the year ending December 31, 2010. Earnings per share of common stock for 2010 would bea. $1.75.b. $.83.c. $1.00.d. $1.17.

97. At December 31, 2010, Hancock Company had 500,000 shares of common stock issued and outstanding, 400,000 of which had been issued and outstanding throughout the year and 100,000 of which were issued on October 1, 2010. Net income for the year ended December 31, 2010, was $1,020,000. What should be Hancock's 2010 earnings per common share, rounded to the nearest penny?a. $2.02b. $2.55c. $2.40d. $2.27

98. Milo Co. had 600,000 shares of common stock outstanding on January 1, issued 126,000 shares on May 1, purchased 63,000 shares of treasury stock on September 1, and issued 54,000 shares on November 1. The weighted average shares outstanding for the year isa. 651,000.b. 672,000.c. 693,000.d. 714,000.

99. On January 1, 2011, Gridley Corporation had 125,000 shares of its $2 par value common stock outstanding. On March 1, Gridley sold an additional 250,000 shares on the open market at $20 per share. Gridley issued a 20% stock dividend on May 1. On August 1, Gridley purchased 140,000 shares and immediately retired the stock. On November 1, 200,000 shares were sold for $25 per share. What is the weighted-average number of shares outstanding for 2011?a. 510,000b. 375,000c. 358,333d. 258,333

100. The following information is available for Barone Corporation:

January 1, 2011 Shares outstanding 1,250,000April 1, 2011 Shares issued 200,000July 1, 2011 Treasury shares purchased 75,000October 1, 2011 Shares issued in a 100% stock dividend 1,375,000

The number of shares to be used in computing earnings per common share for 2011 isa. 2,825,500.b. 2,737,500.

c. 2,725,000.d. 1,706,250.

101. At December 31, 2010 Rice Company had 300,000 shares of common stock and 10,000 shares of 5%, $100 par value cumulative preferred stock outstanding. No dividends were declared on either the preferred or common stock in 2010 or 2011. On January 30, 2012, prior to the issuance of its financial statements for the year ended December 31, 2011, Rice declared a 100% stock dividend on its common stock. Net income for 2011 was $950,000. In its 2011 financial statements, Rice's 2011 earnings per common share should bea. $1.50.b. $1.58.c. $3.00.d. $3.17.

102. Fultz Company had 300,000 shares of common stock issued and outstanding at December 31, 2010. During 2011, no additional common stock was issued. On January 1, 2011, Fultz issued 400,000 shares of nonconvertible preferred stock. During 2011, Fultz declared and paid $180,000 cash dividends on the common stock and $150,000 on the nonconvertible preferred stock. Net income for the year ended December 31, 2011, was $960,000. What should be Fultz's 2011 earnings per common share, rounded to the nearest penny?a. $1.16b. $2.10c. $2.70d. $3.20

103. At December 31, 2010 Pine Company had 200,000 shares of common stock and 10,000 shares of 4%, $100 par value cumulative preferred stock outstanding. No dividends were declared on either the preferred or common stock in 2010 or 2011. On February 10, 2012, prior to the issuance of its financial statements for the year ended December 31, 2011, Pine declared a 100% stock split on its common stock. Net income for 2011 was $720,000. In its 2011 financial statements, Pine’s 2011 earnings per common share should bea. $3.40.b. $3.20.c. $1.70.d. $1.00.

104. Stine Inc. had 300,000 shares of common stock issued and outstanding at December 31, 2010. On July 1, 2011 an additional 300,000 shares were issued for cash. Stine also had stock options outstanding at the beginning and end of 2011 which allow the holders to purchase 90,000 shares of common stock at $28 per share. The average market price of Stine’s common stock was $35 during 2011. The number of shares to be used in computing diluted earnings per share for 2011 isa. 672,000b. 618,000c. 522,000d. 468,000

105. Kasravi Co. had net income for 2011 of $300,000. The average number of shares outstanding for the period was 200,000 shares. The average number of shares under outstanding options, at an option price of $30 per share is 12,000 shares. The average market price of the common stock during the year was $36. What should Kasravi Co. report for diluted earnings per share for the year ended 2011?a. $1.50b. $1.49c. $1.43d. $1.42

106. On January 2, 2011, Worth Co. issued at par $2,000,000 of 7% convertible bonds. Each $1,000 bond is convertible into 10 shares of common stock. No bonds were converted during 2011. Worth had 200,000 shares of common stock outstanding during 2011. Worth’s 2011 net income was $600,000 and the income tax rate was 30%. Worth’s diluted earnings per share for 2011 would be (rounded to the nearest penny):a. $3.49.b. $3.17.c. $3.00.d. $3.36.

107. Beaty Inc. purchased Dunbar Co. and agreed to give stockholders of Dunbar Co. 10,000 additional shares in 2012 if Dunbar Co.’s net income in 2011 is $500,000; in 2010 Dunbar Co.’s net income is $520,000. Beaty Inc. has net income for 2010 of $200,000 and has an average number of common shares outstanding for 2010 of 100,000 shares. What should Beaty report as diluted earnings per share for 2010?a. $2.22b. $2.00c. $1.82d. $1.67

Use the following information for questions 108 and 109.

Hanson Co. had 200,000 shares of common stock, 20,000 shares of convertible preferred stock, and $1,000,000 of 10% convertible bonds outstanding during 2011. The preferred stock is convertible into 40,000 shares of common stock. During 2011, Hanson paid dividends of $1.20 per share on the common stock and $4 per share on the preferred stock. Each $1,000 bond is convertible into 45 shares of common stock. The net income for 2011 was $800,000 and the income tax rate was 30%.

108. Basic earnings per share for 2011 is (rounded to the nearest penny)a. $2.94.b. $3.22.c. $3.35.d. $3.60.

109. Diluted earnings per share for 2011 is (rounded to the nearest penny)a. $2.77.b. $2.81.c. $3.05.d. $3.33.

110. Fugate Company had 500,000 shares of common stock issued and outstanding at December 31, 2010. On July 1, 2011 an additional 500,000 shares were issued for cash. Fugate also had stock options outstanding at the beginning and end of 2011 which allow the holders to purchase 150,000 shares of common stock at $20 per share. The average market price of Fugate's common stock was $25 during 2011. What is the number of shares that should be used in computing diluted earnings per share for the year ended December 31, 2011?a. 1,030,000b. 870,000c. 787,500d. 780,000

111. Shipley Corporation had net income for the year of $480,000 and a weighted average number of common shares outstanding during the period of 200,000 shares. The company has a convertible bond issue outstanding. The bonds were issued four years ago at par ($2,000,000), carry a 7% interest rate, and are convertible into 40,000 shares of common stock. The company has a 40% tax rate. Diluted earnings per share area. $1.65b. $2.23.c. $2.35.d. $2.58.

112. Colt Corporation purchased Massey Inc. and agreed to give stockholders of Massey Inc. 50,000 additional shares in 2012 if Massey Inc.’s net income in 2011 is $400,000 or more; in 2010 Massey Inc.’s net income is $410,000. Colt has net income for 2010 of $800,000 and has an average number of common shares outstanding for 2010 of 500,000 shares. What should Colt report as earnings per share for 2010?

Basic Earnings Diluted EarningsPer Share Per Share

a. $1.60 $1.60b. $1.45 $1.60c. $1.60 $1.45d. $1.45 $1.45

113. On January 2, 2010, Perez Co. issued at par $10,000 of 6% bonds convertible in total into 1,000 shares of Perez's common stock. No bonds were converted during 2010. Throughout 2010, Perez had 1,000 shares of common stock outstanding. Perez's 2010 net income was $3,000, and its income tax rate is 30%. No potentially dilutive securities other than the convertible bonds were outstanding during 2010. Perez's diluted earnings per share for 2010 would be (rounded to the nearest penny)a. $1.50.b. $1.71.c. $1.80.d. $3.42.

114. At December 31, 2010, Kifer Company had 500,000 shares of common stock outstanding. On October 1, 2011, an additional 100,000 shares of common stock were issued. In addition, Kifer had $10,000,000 of 6% convertible bonds outstanding at December 31, 2010, which are convertible into 225,000 shares of common stock. No bonds were converted into common stock in 2011. The net income for the year ended December 31, 2011, was $3,000,000. Assuming the income tax rate was 30%, the diluted earnings per share for the year ended December 31, 2011, should be (rounded to the nearest penny)a. $6.52.b. $4.80.c. $4.56.d. $4.00.

115. On January 2, 2011, Mize Co. issued at par $300,000 of 9% convertible bonds. Each $1,000 bond is convertible into 30 shares. No bonds were converted during 2007. Mize had 50,000 shares of common stock outstanding during 2011. Mize 's 2011 net income was $160,000 and the income tax rate was 30%. Mize's diluted earnings per share for 2011 would be (rounded to the nearest penny)a. $2.71.b. $3.03.c. $3.20.d. $3.58.

116. At December 31, 2010, Sager Co. had 1,200,000 shares of common stock outstanding. In addition, Sager had 450,000 shares of preferred stock which were convertible into 750,000 shares of common stock. During 2011, Sager paid $600,000 cash dividends on the common stock and $400,000 cash dividends on the preferred stock. Net income for 2011 was $3,400,000 and the income tax rate was 40%. The diluted earnings per share for 2011 is (rounded to the nearest penny)a. $1.24.b. $1.74.c. $2.51.d. $2.84.


Lerner Co. had 200,000 shares of common stock, 20,000 shares of convertible preferred stock, and $1,000,000 of 10% convertible bonds outstanding during 2011. The preferred stock is convertible into 40,000 shares of common stock. During 2011, Lerner paid dividends of $.90 per share on the common stock and $3.00 per share on the preferred stock. Each $1,000 bond is convertible into 45 shares of common stock. The net income for 2011 was $600,000 and the income tax rate was 30%.

117. Basic earnings per share for 2011 is (rounded to the nearest penny)a. $2.21.b. $2.42.c. $2.51.d. $2.70.

118. Diluted earnings per share for 2011 is (rounded to the nearest penny)a. $2.14.b. $2.25.

c. $2.35.d. $2.46.

119. Yoder, Incorporated, has 3,200,000 shares of common stock outstanding on December 31, 2010. An additional 800,000 shares of common stock were issued on April 1, 2011, and 400,000 more on July 1, 2011. On October 1, 2011, Yoder issued 20,000, $1,000 face value, 8% convertible bonds. Each bond is convertible into 20 shares of common stock. No bonds were converted into common stock in 2011. What is the number of shares to be used in computing basic earnings per share and diluted earnings per share, respectively?a. 4,000,000 and 4,000,000b. 4,000,000 and 4,100,000c. 4,000,000 and 4,400,000d. 4,400,000 and 5,200,000

120. Nolte Co. has 4,000,000 shares of common stock outstanding on December 31, 2010. An additional 200,000 shares are issued on April 1, 2011, and 480,000 more on September 1. On October 1, Nolte issued $6,000,000 of 9% convertible bonds. Each $1,000 bond is convertible into 40 shares of common stock. No bonds have been converted. The number of shares to be used in computing basic earnings per share and diluted earnings per share on December 31, 2011 isa. 4,310,000 and 4,310,000.b. 4,310,000 and 4,370,000.c. 4,310,000 and 4,550,000.d. 5,080,000 and 5,320,000.

121. At December 31, 2010, Tatum Company had 2,000,000 shares of common stock outstanding. On January 1, 2011, Tatum issued 500,000 shares of preferred stock which were convertible into 1,000,000 shares of common stock. During 2011, Tatum declared and paid $1,500,000 cash dividends on the common stock and $500,000 cash dividends on the preferred stock. Net income for the year ended December 31, 2011, was $5,000,000. Assuming an income tax rate of 30%, what should be diluted earnings per share for the year ended December 31, 2011? (Round to the nearest penny.)a. $1.50b. $1.67c. $2.50d. $2.08

122. At December 31, 2010, Emley Company had 1,200,000 shares of common stock outstanding. On September 1, 2011, an additional 400,000 shares of common stock were issued. In addition, Emley had $12,000,000 of 6% convertible bonds outstanding at December 31, 2010, which are convertible into 800,000 shares of common stock. No bonds were converted into common stock in 2011. The net income for the year ended December 31, 2011, was $4,500,000. Assuming the income tax rate was 30%, what should be the diluted earnings per share for the year ended December 31, 2011, rounded to the nearest penny?a. $2.11b. $3.38c. $2.35d. $2.45

123. Grimm Company has 1,800,000 shares of common stock outstanding on December 31, 2010. An additional 150,000 shares of common stock were issued on July 1, 2011, and 300,000 more on October 1, 2011. On April 1, 2011, Grimm issued 6,000, $1,000 face value, 8% convertible bonds. Each bond is convertible into 40 shares of common stock. No bonds were converted into common stock in 2011. What is the number of shares to be used in computing basic earnings per share and diluted earnings per share, respectively, for the year ended December 31, 2011?a. 1,950,000 and 2,130,000b. 1,950,000 and 1,950,000c. 1,950,000 and 2,190,000d. 2,250,000 and 2,430,000


Information concerning the capital structure of Piper Corporation is as follows: December 31, 2011 2010

Common stock 150,000 shares 150,000 sharesConvertible preferred stock 15,000 shares 15,000 shares9% convertible bonds $2,400,000 $2,400,000

During 2011, Piper paid dividends of $1.20 per share on its common stock and $3.00 per share on its preferred stock. The preferred stock is convertible into 30,000 shares of common stock. The 9% convertible bonds are convertible into 75,000 shares of common stock. The net income for the year ended December 31, 2011, was $600,000. Assume that the income tax rate was 30%.

124. What should be the basic earnings per share for the year ended December 31, 2011, rounded to the nearest penny?a. $2.66b. $2.92c. $3.70d. $4.00

125. What should be the diluted earnings per share for the year ended December 31, 2011, rounded to the nearest penny?a. $3.20b. $2.95c. $2.83d. $2.35

126. Warrants exercisable at $20 each to obtain 30,000 shares of common stock were outstanding during a period when the average market price of the common stock was $25. 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 shares bya. 30,000.b. 24,000.c. 6,000.d. 7,500.

127. Terry Corporation had 300,000 shares of common stock outstanding at December 31, 2010. In addition, it had 90,000 stock options outstanding, which had been granted to certain executives, and which gave them the right to purchase shares of Terry's stock at an option price of $37 per share. The average market price of Terry's common stock for 2010 was $50. What is the number of shares that should be used in computing diluted earnings per share for the year ended December 31, 2010?a. 300,000b. 331,622c. 366,600d. 323,400

Multiple Choice Answers—Earnings Per Share—Computational


96. c 101. a 106. b 111. c 116. b 121. b 126. c97. c 102. c 107. c 112. c 117. d 122. c 127. d98. b 103. c 108. d 113. b 118. c 123. a99. b 104. d 109. c 114. c 119. b 124. c

100. c 105. b 110. d 115. b 120. b 125. b

MULTIPLE CHOICE—Earnings Per Share—CPA Adapted

128. Didde Co. had 300,000 shares of common stock issued and outstanding at December 31, 2010. No common stock was issued during 2011. On January 1, 2011, Didde issued 200,000 shares of nonconvertible preferred stock. During 2011, Didde declared and paid $100,000 cash dividends on the common stock and $80,000 on the preferred stock. Net income for the year ended December 31, 2011 was $620,000. What should be Didde's 2011 earnings per common share?a. $2.07b. $1.80c. $1.73d. $1.47

129. At December 31, 2011 and 2010, Miley Corp. had 180,000 shares of common stock and 10,000 shares of 5%, $100 par value cumulative preferred stock outstanding. No dividends were declared on either the preferred or common stock in 2011 or 2010. Net income for 2011 was $400,000. For 2011, earnings per common share amounted toa. $2.22.b. $1.94.c. $1.67.d. $1.11.

130. Marsh Co. had 2,400,000 shares of common stock outstanding on January 1 and December 31, 2011. In connection with the acquisition of a subsidiary company in June 2010, Marsh is required to issue 100,000 additional shares of its common stock on July 1, 2012, to the former owners of the subsidiary. Marsh paid $200,000 in preferred stock dividends in 2011, and reported net income of $3,400,000 for the year. Marsh's diluted earnings per share for 2011 should bea. $1.42.b. $1.36.c. $1.33.d. $1.28.

131. Foyle, Inc., had 560,000 shares of common stock issued and outstanding at December 31, 2010. On July 1, 2011, an additional 40,000 shares of common stock were issued for cash. Foyle also had unexercised stock options to purchase 32,000 shares of common stock at $15 per share outstanding at the beginning and end of 2011. The average market price of Foyle's common stock was $20 during 2011. What is the number of shares that should be used in computing diluted earnings per share for the year ended December 31, 2011?a. 580,000 b. 588,000c. 608,000d. 612,000

132. When computing diluted earnings per share, convertible securities area. ignored.b. recognized only if they are dilutive.c. recognized only if they are antidilutive.d. recognized whether they are dilutive or antidilutive.

133. In determining diluted earnings per share, dividends on nonconvertible cumulative preferred stock should bea. disregarded.b. added back to net income whether declared or not.c. deducted from net income only if declared.d. deducted from net income whether declared or not.

134. The if-converted method of computing earnings per share data assumes conversion of convertible securities as of thea. beginning of the earliest period reported (or at time of issuance, if later).b. beginning of the earliest period reported (regardless of time of issuance).c. middle of the earliest period reported (regardless of time of issuance).d. ending of the earliest period reported (regardless of time of issuance).

Multiple Choice Answers—Earnings Per Share—CPA Adapted


128. b 129. b 130. d 131. b 132. b 133. d 134. a

DERIVATIONS — Earnings Per Share, Computational

No. Answer Derivation $1,050,000

96. c ———————————— = $1.00. 6

600,000 + (900,000 × — )12

$1,020,00097. c ———————————— = $2.40.

3400,000 + (100,000 × —- )

12

DERIVATIONS — Earnings Per Share, Computational (cont.)

No. Answer Derivation98. b 600,000 + (126,000 × 8/12) – (63,000 × 4/12) + (54,000 × 2/12) = 672,000.

99. b [(125,000 × 2 × 1.20) + (375,000 × 2 × 1.20) + (450,000 × 3) + (310,000 × 3)+ (510,000 × 2)] ÷ 12 = 375,000.

100. c [(1,250,000 × 3 × 2) + (1,450,000 × 3 × 2) + (1,375,000 × 3 × 2)+ (2,750,000 × 3)] ÷ 12 = 2,725,000.

101. a [$950,000 – (10,000 × $100 × .05)] ÷ (300,000 × 2) = $1.50.

$960,000 – $150,000102. c —————————— = $2.70.

300,000

103. c [$720,000 – (10,000 ´ $100 ´ .04)] (200,000 ´ 2) = $1.70.

104 d (300,000 ´ 6/12) + (600,000 ´ 6/12) + [((35 – 28) 35) ´ 90,000] = 468,000.

105. b [($36 – $30) $36] ´ 12,000 = 2,000$300,000 (200,000 + 2,000) = $1.49.

106. b ($2,000,000 $1,000) ´ 10 = 20,000$2,000,000 ´ .07 ´ (1 – .30) = $98,000($600,000 + $98,000) (200,000 + 20,000) = $3.17.

107. c Since $520,000 > $500,000 include 10,000 shares in DEPS$200,000 (100,000 + 10,000) = $1.82.

108. d [$800,000 – (20,000 ´ $4] 200,000 = $3.60.

109. c [$800,000 + ($1,000,000 ´ .10 ´ .7)] [200,000 + 40,000 + (1,000 ´ 45)] = $3.05.

110. d 500,000 + (500,000 × 6/12) + [(25 – 20)/25 × 150,000] = 780,000.

111. c [$480,000 + ($2,000,000 × .07 × .60)] ÷ (200,000 + 40,000) = $2.35.

112. c Basis: $800,000 ÷ 500,000 = $1.60.Diluted: $800,000 ÷ (500,000 + 50,000) = $1.45

$3,000 + ($10,000 × .06 × .70)113. b —————————————— = $1.71.

1,000 + 1,000


No. Answer Derivation$3,000,000 + ($10,000,000 × .06 × .7)

114. c ————————————————— = $4.56. 3

500,000 + (100,000 × —- ) + 225,00012

$160,000 + ($300,000 × .09 × .7)115. b ————————————————— = $3.03.

50,000 + [($300,000 ÷ $1,000) × 30)]

$3,400,000116. b —————————— = $1.74.

1,200,000 + 750,000

$600,000 – (20,000 × $3)117. d ——————————— = $2.70.

200,000

$600,000 + ($1,000,000 × .10 × .7)118. c ———————————————— = $2.35.

200,000 + 45,000 + 40,000

119. b 3,200,000 + (800,000 × 9/12) + (400,000 × 6/12) = 4,000,000 (BEPS)4,000,000 + (20,000 × 20 × 3/12) = 4,100,000 (DEPS).

120. b 4,000,000 + (200,000 × 9/12) + (480,000 × 4/12) = 4,310,000.4,310,000 + [($6,000,000 ÷ $1,000) × 40 × 3/12] = 4,370,000.

$5,000,000121. b —————————— = $1.67.

2,000,000 + 1,000,000

$4,500,000 + ($12,000,000 × .06 × .7)122. c —————————————————— = $2.35.

1,200,000 + (400,000 4/12) + 800,000

123. a 1,800,000 + (150,000 × 6/12) + (300,000 × 3/12) = 1,950,0001,950,000 + (6,000 × 40 × 9/12) = 2,130,000.

$600,000 – (15,000 × $3.00)124. c ————————————— = $3.70.

150,000


No. Answer Derivation $600,000 + ($2,400,000 × .09 × .7)

125. b ———————————————— = $2.95.150,000 + 75,000 + 30,000

126. c 30,000 × $20 ÷ $25 = 24,00030,000 – 24,000 = 6,000.

127. d 90,000 – (90,000 × $37 ÷ $50) = 23,400300,000 + 23,400 = 323,400.

DERIVATIONS — Earnings Per Share, CPA Adapted

No.Answer Derivation128. b $620,000 – $80,000

————————— = $1.80.300,000

129. b $400,000 – (10,000 × $100 × .05)——————————————— = $1.94.

180,000

130. d $3,400,000 – $200,000——————————– = $1.28. 2,400,000 + 100,000

131. b 560,000 + (40,000 × 6/12) + [32,000 – (32,000 × $15 ÷ $20)] = 588,000.

132. b Conceptual.

133. d Conceptual.

134. a Conceptual.

earnings per share

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