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标题: Reading 32: Understanding the Income Statement-LOS g 习题精选 [打印本页]

作者: 1215 时间: 2011-3-12 11:26 标题: [2011]Session 8-Reading 32: Understanding the Income Statement-LOS g 习题精选

Session 8: Financial Reporting and Analysis: The Income Statement, Balance Sheet, and Cash Flow Statement
Reading 32: Understanding the Income Statement

LOS g: Describe the components of earnings per share and calculate a company's earnings per share (both basic and diluted earnings per share) for both a simple and complex capital structure.

For an organization with a simple capital structure, the computation of earnings per share is least likely to consider:

A)
net income.

B)
the weighted average number of preferred shares outstanding.

C)
the weighted average number of common shares outstanding.

The equation for Basic EPS (net income – preferred dividends / weighted average number of common shares outstanding) does not include the number of preferred shares outstanding, because the objective is to determine the earnings available to the common shareholder.

作者: 1215 时间: 2011-3-12 11:30

Savannah Corp.’s financial accounts for the year ended December 31 included the following information:

Net Income: $122,000
Preferred Stock Dividends Paid: $35,000
Common Stock Dividends Paid: $42,000
Common Shares outstanding at January 1: 50,000
10% preferred $100 par value shares outstanding at January 1: 3,500

No stock transactions occurred during the year and all preferred stock dividends were paid. Basic earnings per share for Savannah are closest to:

A)
$0.90.

B)
$1.74.

C)
$2.44.

Savannah Corp.’s basic EPS ((net income – preferred dividends) / weighted average number of common shares outstanding) was (($122,000 ? $35,000) / $50,000 =) $1.74.

作者: 1215 时间: 2011-3-12 11:30

Sampson Corp. had 500,000 shares of common stock outstanding at the beginning of the year. The average market price was $20.

On April 1, Sampson issued 100,000 shares of $1000 par value 10 percent preferred stock.
On July 1, Sampson issued 200,000 warrants to purchase 10 shares of common stock each at $22 per share.
On October 1, Sampson repurchased 60,000 of common stock as treasury stock for $15 per share.

The weighted average common shares outstanding Sampson should use to compute basic earnings per share (EPS) was:

A)
515,000.

B)
485,000.

C)
600,000.

Only the October 1 transaction affects the weighted average common shares outstanding because the April 1 transaction would not affect the number of shares outstanding and the July 1 transaction involves warrants which would not be included in the basic EPS calculation. The computation for basic EPS is [(500,000 × 12) ? (60,000 × 3)] / 12 = 485,000.

作者: 1215 时间: 2011-3-12 11:31

Which of the following securities would least likely be found in a simple capital structure?

A)
3%, $100 par value convertible preferred.

B)
6%, $5000 par value putable bond.

C)
7%, $100 par value non convertible preferred.

A simple capital structure contains no potentially dilutive securities such as stock options, warrants, or convertible preferred stock.

作者: 1215 时间: 2011-3-12 11:31

A complex capital structure, for purposes of determining disclosure of diluted Earnings Per Share, is distinguished from a simple capital structure by the:

A)
company's use of debt to finance its operations.

B)
company having preferred stock outstanding.

C)
company having issued warrants, convertible securities, or options.

A complex structure contains potentially dilutive securities such as options warrants or convertible securities. Where as simple capital structures contain no potentially dilutive securities and contains only common stock and non-convertible securities.

作者: 1215 时间: 2011-3-12 11:31

Bluff, Inc.’s stock transactions during the year were as follows:

January 1 90,000 common shares outstanding.
April 1 20% stock dividend is declared and issued.
October 1 10,000 shares are reacquired as treasury stock.

What is Bluff’s weighted average number of shares outstanding during the year?

A)
98,000.

B)
101,000.

C)
105,500.

Initial shares: 90,000 × 1.20 =

108,000

– Reacquired treasury shares: 10,000 × 3/12 =

–2,500

105,500

作者: 1215 时间: 2011-3-12 13:57

Jersey, Inc.’s financial information included the following for its year ended December 31:

160,000 shares of common stock were outstanding for the entire year.
18,000 shares of 10%, $100 par value cumulative preferred stock were outstanding for the entire year.
Common stock dividends paid during the current year were $240,000.
All preferred stock dividends were paid for the current year.
Net income was $720,000.

Basic earnings per share for Jersey, Inc. for the year ended December 31 are closest to:

A)
$3.38.

B)
$4.50.

C)
$2.81.

Jersey, Inc.’s basic EPS = (net income – preferred dividends) / (weighted average number of common shares outstanding) was ($720,000 - $180,000)/160,000 = $3.38.

作者: 1215 时间: 2011-3-12 13:57

Which type of a capital structure contains no dilutive securities?

A)
Simple.

B)
Basic.

C)
Complex.

A complex capital structure contains potentially dilutive securities such as options, warrants, or convertible securities. There is no basic capital structure but there are basic earnings per share which does NOT consider the effects of any dilutive securities in the computation of EPS.

作者: 1215 时间: 2011-3-12 13:58

A firm with a capital structure consisting of only common stock and non-convertible bonds is said to have a:

A)
simple capital structure.

B)
non-diluted capital structure.

C)
straight capital structure.

A simple capital structure is one that contains no securities that have the potential to dilute a firm’s earnings per share. For example, convertible bonds, convertible preferred stock, options, and warrants have the potential to dilute earnings per share upon conversion or exercise.

作者: 1215 时间: 2011-3-12 13:58

A complex capital structure would typically contain:

A)
variable rate notes.

B)
convertible bonds.

C)
bank notes.

A complex capital structure is one that contains securities that have the potential to dilute a firm’s earnings per share. For example, convertible bonds, convertible preferred stock, options, and warrants have the potential to dilute earnings per share upon conversion or exercise.

作者: 1215 时间: 2011-3-12 13:58

The SSP Company had 5 million shares outstanding on January 1. On February 15 the board of directors approved a 3:2 stock split, effective April 1. What is the weighted average number of shares outstanding for the SSP Company for year-end?

A)
7,500,000 shares.

B)
6,875,000 shares.

C)
5,625,000 shares.

Stock splits and stock dividends are applied to all shares that existed at the beginning of the period and shares that were issued or repurchased during the period, but prior to the split or dividend. For SSP, the 5 million beginning-of-year shares outstanding are adjusted to 7.5 million shares (5.0 × 3/2) as a result of the 3:2 split.

作者: 1215 时间: 2011-3-12 13:59

Zimmer Co. had the following common shares outstanding:

January 1, 2003: 50,000
October 1, 2003: Issued 20,000 shares
March 1, 2004: Issued a 10% stock dividend
July 1, 2004: Declared a 2 for 1 stock split
October 1, 2004: Repurchased 30,000 shares

Calculate the weighted average number of common shares outstanding for 2003 and 2004.

2003 2004

A)

55,000 124,500

B)

10,000 124,000

C)

55,000 146,500

For year 2003:
50,000 × 12 = 600,000
20,000 × 3 = 60,000
660,000/12 = 55,000

For year 2004:
70,000 × 1.1 × 2 = 154,000 × 12 = 1,848,000
(30,000) × 3 = (90,000)
1,758,000 / 12 = 146,500

作者: 1215 时间: 2011-3-12 14:02

Robinson Company had 1 million shares outstanding at the beginning of the year. On April 1, Robinson issued an additional 300,000 shares. On July 1, Robinson issued 200,000 more shares. What is Robinson's weighted average number of shares outstanding for the calculation of earnings per share?

A)
1,325,000 shares.

B)
1,500,000 shares.

C)
1,200,000 shares.

Weighted average shares = 1,000,000 + (0.75) 300,000 + (0.5) 200,000 = 1,325,000 shares

作者: 1215 时间: 2011-3-12 14:02

The following information pertains the QRK Company:

One million shares of common stock outstanding at the beginning of 2005.
200,000 shares issued on the last day of March.
500,000 shares issued on the last day of June.
800,000 shares issued on the last day of September.

What is the number of shares that should be used to compute 2005 earnings per share for the QRK Company?

A)
2.5 million.

B)
1.5 million.

C)
1.6 million.

The weighted average number of common shares outstanding is the number of shares outstanding during the year weighted by the portion of the year they were outstanding. For the QRK Company, the weighted number of shares outstanding is the original one million shares plus 150,000 shares for the end-of-March issue (= 200,000 × 9/12), plus 250,000 shares for the end-of-June issue (= 500,000 × 6/12), plus 200,000 shares for the end-of-September issue (= 800,000 × 3/12), or 1.6 million shares.

作者: 1215 时间: 2011-3-12 14:03

The ZZT Company went public on June 1, 2004, by issuing 25 million shares of common stock. In 2005, the firm raised additional capital by issuing 2 million shares of preferred stock. What is the weighted average number of common shares outstanding for the year ending December 31, 2005?

A)
25,000,000.

B)
14,583,333.

C)
10,416,667.

The weighted average number of common shares outstanding is the number of shares outstanding during the year weighted by the portion of the year they were outstanding. Since no new common shares were issued in 2005, and there were 25 million shares at the end of 2004, there are 25 million shares at the end of 2005. Note that the preferred stock shares do not affect the common shares outstanding.

作者: 1215 时间: 2011-3-12 14:03

A simple capital structure is least likely to include:

A)
convertible bonds.

B)
treasury stock.

C)
callable preferred stock.

Simple capital structures do not include any potentially dilutive securities (a security that could decrease earnings per share if exercised). Convertible bonds are potentially dilutive.

作者: 1215 时间: 2011-3-12 14:03

Ajax Company has a simple capital structure. Which of the following will NOT be found on its balance sheet?

A)
6%, $50 par value callable bond.

B)
10%, secured mortgage bond denominated in Swiss francs.

C)
3%, $100 par value convertible bond.

If convertible bonds exist, the firm has a complex capital structure.

作者: 1215 时间: 2011-3-12 14:04

An analyst has gathered the following information about a company:

110,000 shares of common outstanding at the beginning of the year.
The company repurchases 20,000 of its own common shares on July 1.
Net income is $300,000 for the year.
10,000 shares of existing 10 percent cumulative $100 par preferred outstanding that is not in arrears at the beginning or ending of the year.
The company also has $1 million in 10 percent callable bonds outstanding.
The company has declared a $0.50 dividend on the common.

What is the company's basic Earnings Per Share?

A)
$3.00.

B)
$2.00.

C)
$1.00.

Interest is already deducted from earnings.

作者: 1215 时间: 2011-3-12 14:04

The standard equation for computing basic earnings per share (EPS) is:

A)
[Net Income – Preferred Dividends] / Weighted Average Number of Common Shares Outstanding.

B)
[Net Income ? Common Dividends] / Weighted Average Number of Common Shares Outstanding.

C)
[Sales ? Cost of Goods Sold] / Number of Preferred Shares Outstanding.

The basic EPS calculation does not consider the effects of any dilutive securities in the computation.

Basic EPS = [Net Income – Preferred Dividends]/Weighted Average Number of Common Shares Outstanding.

作者: 1215 时间: 2011-3-12 14:04

Connecticut, Inc.’s stock transactions during the year 20X5 were as follows:

January 1: 360,000 common shares outstanding.
April 1: 1 for 3 reverse stock split.
July 1: 60,000 common shares issued.

When computing for earnings per share (EPS) computation purposes, what is Connecticut’s weighted average number of shares outstanding during 20X5?

A)
150,000.

B)
210,000.

C)
270,000.

Connecticut’s January 1 balance of common shares outstanding is adjusted retroactively for the 1 for 3 reverse stock split, meaning there are (360,000 / 3) = 120,000 “new” shares treated as if they had been outstanding since January 1. The weighted average of the shares issued in July, (60,000 × 6 / 12) = 30,000 is added to that figure, for a total of 150,000.

作者: 1215 时间: 2011-3-12 14:05

For a firm with a simple capital structure, all of the following are necessary to measure basic earnings per share (EPS) EXCEPT:

A)
the timing and number of shares issued or repurchased during the year.

B)
dividends paid to preferred shareholders.

C)
dividends paid to common shareholders.

Basic EPS = earnings available to common shareholders divided by the weighted average number of common shares outstanding. Earnings available to common shareholders equals net income minus preferred dividends.

作者: 多多在北京 时间: 2011-8-31 10:04

Bluff, Inc.’s stock transactions during the year were as follows:
January 1                      90,000 common shares outstanding.
April 1                           20% stock dividend is declared and issued.
October 1                    10,000 shares are reacquired as treasury stock.
What is Bluff’s weighted average number of shares outstanding during the year?
A)
98,000.
B)
101,000.
C)
105,500.

正确答案应该是：B
1 January       shares outstanding    90,000
1 April             20%stock issued       18,000
1 October       shares repurchased  (10,000)
shares outstanding 31 December    98000
90,000 x 3/12=22500
(90,000+18,000) x 6/12=54000
98,000 x 3/12=24500
Weighted average number of shares ourstanding= 22500+54000+24500=101,000

作者: gaoflex 时间: 2011-10-27 04:02

thank you.

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Initial shares: 90,000 × 1.20 =	108,000
– Reacquired treasury shares: 10,000 × 3/12 =	–2,500
	105,500