Q31. An analyst has gathered the following information about Barnstabur, Inc., for the year:

§           Reported net income of $30,000.

§           5,000 shares of common stock and 2,000 shares of 8%, $90 par preferred stock outstanding during the whole year.

§           During the year, Barnstabur issued at par, $60,000 of 6.0% convertible bonds, with each of the 60 bonds convertible into 110 shares of the Barnstabur common stock.

If Barnstabur’s effective tax rate is 40%, what will Barnstabur report for diluted earnings per share (EPS)?

A)     $1.53.

B)     $2.36.

C)     $1.66.

Q32. Selected information from Baltimore Corp’s financial activities in the year 2004 is as follows:

§           Net income was $4,200,000 .

§           750,000 shares of common stock were outstanding on January 1.

§           The average market price per share was $50 in 2004.

§           Dividends were paid in 2004.

10,000 warrants, which allowed the holder to purchase 10 shares of common stock for each warrant held at a price of $40 per common share, were outstanding the entire year. 

Baltimore’s diluted earnings per share (Diluted EPS) for 2004 is closest to:

A)   $5.45.

B)   $5.60.

C)   $4.94.

Q33. The Allen Corporation had 100,000 shares of common stock outstanding at the beginning of the year. Allen issued 30,000

     shares of common May 1. On July 1, the company issued a 10% stock dividend. On September 1, Allen issued 1,000, 10%

bonds convertible into 21 shares of stock each. What is the weighted average number of shares to be used in computing basic

and diluted earnings per share (EPS), assuming the convertible bonds are dilutive?

          Basic Shares                                 Diluted Shares

A)                                                      130,000  132,000

B)                                                     132,000  146,000

C)                                                     132,000  139,000

Q34. Quad Associates, Inc.’s net income for 2005 was $892,000 with 400,000 shares outstanding. The tax rate was 40 percent.

Quad had 2,000 six percent $1,000 par value convertible bonds that were issued in 2004. Each bond was convertible into 40

shares of common stock. Quad, Inc.’s diluted earnings per share (Diluted EPS) for 2005 was closest to:

A)   $2.11.

B)   $2.01.

C)   $2.23.