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DILUTIVE SECURITIES AND EARNINGS mcqss homework

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Question;88. Jett 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, 2007.;Earnings per share of common stock for 2007 would be;a. $1.75.;b. $.83.;c. $1.00.;d. $1.17.;89. At December 31, 2007, Norbett 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, 2007. Net income;for the year ended December;31, 2007, was $1,020,000. What should be Norbett's 2007 earnings;per common share, rounded to the nearest penny?;a. $2.02;b. $2.55;c. $2.40;d. $2.27;90. Loeb 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 is;a. 651,000.;b. 672,000.;c. 693,000.;d. 714,000.;91. On January 1, 2008, Dingler Corporation;had 125,000 shares of its $2 par value common stock outstanding. On March 1;Dingler sold an additional 250,000 shares on the open market at $20 per;share. Dingler issued a 20% stock;dividend on May 1. On August 1, Dingler 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 2008?;a. 510,000;b. 375,000;c. 358,333;d. 258,333;92. The following information;is available for Alley Corporation;January 1, 2008 Shares outstanding 1,250,000;April 1, 2008 Shares issued 200,000;July 1, 2008 Treasury shares;purchased 75,000;October 1, 2008 Shares issued in a 100%;stock dividend 1,375,000;The number of shares to be used in computing earnings per common;share for 2008 is;a. 2,825,500.;b. 2,737,500.;c. 2,725,000.;d. 1,706,250.;93. At December 31, 2007 Polk 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 2007 or 2008. On January 30, 2009, prior to the issuance of its;financial statements for the year ended December 31, 2008, Polk declared a 100% stock;dividend on its common stock. Net income for 2008 was $950,000. In its 2008;financial statements, Polk's 2008 earnings per common share should be;a. $1.50.;b. $1.58.;c. $3.00.;d. $3.17.;94. Caruso Company had;500,000 shares of common stock issued and outstanding at December 31, 2007. On July 1, 2008 an additional;500,000 shares were issued for cash. Caruso also had stock options outstanding;at the beginning and end of 2008 which allow the holders to purchase 150,000;shares of common stock at $20 per share. The average market price of Caruso's;common stock was $25 during 2008. What is the number of shares that should be;used in computing diluted earnings per share for the year ended December 31, 2008?;a. 1,030,000;b. 870,000;c. 787,500;d. 780,000;95. Hoffman 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 are;a. $1.65;b. $2.23.;c. $2.35.;d. $2.58.;96. Kern Corporation;purchased Goltra Inc. and agreed to give stockholders of Goltra Inc. 50,000;additional shares in 2009 if Goltra Inc.?s net income in 2008 is $400,000 or;more, in 2007 Goltra Inc.?s net income is $410,000. Kern has net income for;2007 of $800,000 and has an average number of common shares outstanding for;2007 of 500,000 shares. What should Kern;report as earnings per share for 2007?;Basic Earnings Diluted Earnings;Per Share Per Share;a. $1.60 $1.60;b. $1.45 $1.60;c. $1.60 $1.45;d. $1.45 $1.45;97. On January 2, 2007, Ramos Co. issued at par $10,000 of 6% bonds;convertible in total into 1,000 shares of Ramos's common stock. No bonds were;converted during 2007. Throughout 2007, Ramos had 1,000 shares of common stock;outstanding. Ramos's 2007 net income was $3,000, and its income tax rate is;30%.No potentially dilutive securities other than the;convertible bonds were outstanding during 2007. Ramos's diluted earnings per share for 2007 would be (rounded to;the nearest penny);a. $1.50.;b. $1.71.;c. $1.80.;d. $3.42.;98. At December 31, 2006, Pratt Company had 500,000 shares of;common stock outstanding. On October;1, 2007, an additional 100,000 shares of common stock were issued.;In addition, Pratt had $10,000,000 of 6% convertible bonds outstanding at December 31, 2006, which;are convertible into 225,000 shares of common stock. No bonds were converted;into common stock in 2007. The net income for the year ended December 31, 2007, was $3,000,000.;Assuming the income tax rate was 30%, the diluted earnings per share for the;year ended December 31, 2007;should be (rounded to the nearest penny);a. $6.52.;b. $4.80.;c. $4.56.;d. $4.00.;99. On January 2, 2007, Dino 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. Dino had;50,000 shares of common stock outstanding during 2007. Dino's 2007 net income;was $160,000 and the income tax rate was 30%. Dino's diluted earnings per share;for 2007 would be (rounded to the nearest penny);a. $2.71.;b. $3.03.;c. $3.20.;d. $3.58.;100. At December 31, 2006, Kegan Co. had 1,200,000 shares of;common stock outstanding. In addition, Kegan;had 450,000 shares of preferred stock which were convertible into 750,000;shares of common stock. During 2007, Kegan paid $600,000 cash dividends on the;common stock and $400,000 cash dividends on the preferred stock. Net income for;2007 was $3,400,000 and the income tax rate was 40%. The diluted earnings per;share for 2007 is (rounded to the nearest penny);a. $1.24.;b. $1.74.;c. $2.51.;d. $2.84.;Use the following information for questions 101;and 102.;Gilley 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 2007. The preferred stock is convertible into 40,000 shares;of common stock. During 2007, Gilley;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 2007 was $600,000;and the income tax rate was 30%.;101. Basic earnings per share for 2007 is;(rounded to the nearest penny);a. $2.21.;b. $2.42.;c. $2.51.;d. $2.70.;102. Diluted earnings per share for 2007 is;(rounded to the nearest penny);a. $2.14.;b. $2.25.;c. $2.35.;d. $2.46.;103. Werth, Incorporated, has 3,200,000 shares;of common stock outstanding on December;31, 2006. An additional 800,000 shares of common stock were issued;on April 1, 2007;and 400,000 more on July 1, 2007.;On October 1, 2007;Werth 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 2007. 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 4,000,000;b. 4,000,000;and 4,100,000;c. 4,000,000;and 4,400,000;d. 4,400,000;and 5,200,000;104. Lemke Co. has 4,000,000 shares of common;stock outstanding on December;31, 2006. An additional 200,000 shares are issued on April 1, 2007, and 480,000;more on September 1. On October 1, Lemke 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, 2007;is;a. 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.;105. At December 31, 2006, Quirk Company had 2,000,000 shares of;common stock outstanding. On January;1, 2007, Quirk issued 500,000 shares of preferred stock which were;convertible into 1,000,000 shares of common stock. During 2007, Quirk 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, 2007, was $5,000,000. Assuming an income tax rate of 30%, what;should be diluted earnings per share for the year ended December 31, 2007? (Round to the nearest penny.);a. $1.50;b. $1.67;c. $2.50;d. $2.08;106. Colaw Company had 300,000 shares of common;stock issued and outstanding at December 31, 2006. During 2007, no additional common stock;was issued. On January 1, 2007;Colaw issued 400,000 shares of nonconvertible preferred stock. During 2007, Colaw;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, 2007, was $960,000. What should be Colaw's 2007 earnings per;common share, rounded to the nearest penny?;a. $1.16;b. $2.10;c. $2.70;d. $3.20;107. At December 31, 2006, Agler Company had 1,200,000 shares of;common stock outstanding. On September;1, 2007, an additional 400,000 shares of common stock were issued.;In addition, Agler had $12,000,000 of 6% convertible bonds outstanding at December 31, 2006, which;are convertible into 800,000 shares of common stock. No bonds were converted;into common stock in 2007. The net income for the year ended December 31, 2007, 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, 2007, rounded to the nearest penny?;a. $2.11;b. $3.38;c. $2.35;d. $2.45;108. Foley Company has 1,800,000 shares of;common stock outstanding on December;31, 2006. An additional 150,000 shares of common stock were issued;on July 1, 2007;and 300,000 more on October;1, 2007. On April;1, 2007, Foley 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 2007. 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, 2007?;a. 1,950,000;and 2,130,000;b. 1,950,000;and 1,950,000;c. 1,950,000;and 2,190,000;d. 2,250,000;and 2,430,000;Use the following information for questions 109;and 110.;Information concerning the capital structure of Simot Corporation is;as follows;December 31;2007 2006;Common stock 150,000 shares 150,000 shares;Convertible preferred stock 15,000 shares 15,000 shares;9% convertible bonds $2,400,000 $2,400,000;During 2007,Simot 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, 2007, was $600,000. Assume that the income tax rate was 30%.;109. What should be the basic earnings per share;for the year ended December;31, 2007, rounded to the nearest penny?;a. $2.66;b. $2.92;c. $3.70;d. $4.00;110. What should be the diluted earnings per;share for the year ended December;31, 2007, rounded to the nearest penny?;a. $3.20;b. $2.95;c. $2.83;d. $2.35;111. 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 by;a. 30,000.;b. 24,000.;c. 6,000.;d. 7,500.;112. Ferry Corporation had 300,000 shares of;common stock outstanding at December;31, 2007. 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 Ferry's stock at an option price of $37 per share. The;average market price of Ferry's common stock;for 2007 was $50. What is the number of shares that should be used in;computing diluted earnings per share for the year ended December 31, 2007?;a. 300,000;b. 331,622;c. 366,600;d. 323,400b. $1.80of issua;113. Peine;Co. had 300,000 shares of common stock issued and outstanding atDecember 31, 2006. No;common stock was issued during 2007. OnJanuary 1, 2007, Peine issued 200,000 shares of;nonconvertible preferred stock. During 2007, Peine declared and paid $100,000;cash dividends on the common stock and $80,000 on the preferred stock. Net;income for the year endedDecember;31, 2007 was $620,000. What should be Peine's 2007 earnings per;common share?;="msonormal">="msonormal">;a. $2.07;b. $1.80;c. $1.73;d. $1.47;114. At December 31, 2007 and 2006, Glass 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 2007 or 2006. Net income for 2007 was $400,000. For 2007, earnings per;common share amounted to;a. $2.22.;b. $1.94.;c. $1.67.;d. $1.11.;115. Royce Co. had 2,400,000 shares of common;stock outstanding on January 1 and December 31, 2007. In connection with the acquisition of a;subsidiary company in June 2006, Royce is required to issue 100,000 additional;shares of its common stock on July;1, 2008, to the former owners of the subsidiary. Royce paid;$200,000 in preferred stock dividends in 2007, and reported net income of;$3,400,000 for the year. Royce's diluted earnings per share for 2007 should be;a. $1.42.;b. $1.36.;c. $1.33.;d. $1.28.;116. Eller, Inc., had 560,000 shares of common;stock issued and outstanding at December 31, 2006. On July 1, 2007, an additional 40,000 shares of;common stock were issued for cash. Eller also had unexercised stock options to;purchase 32,000 shares of common stock at $15 per share outstanding at the;beginning and end of 2007. The average market price of Eller's common stock was;$20 during 2007. What is the number of shares that should be used in computing;diluted earnings per share for the year ended December 31, 2007?;a. 580,000;b. 588,000;c. 608,000;d. 612,000;117. When computing diluted earnings per share;convertible securities are;a. ignored.;b. recognized;only if they are dilutive.;c. recognized;only if they are antidilutive.;d. recognized;whether they are dilutive or antidilutive.;118. In determining diluted earnings per share;dividends on nonconvertible cumulative preferred stock should be;a. 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.;119. The if-converted method of computing;earnings per share data assumes conversion of convertible securities as of the;a. 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).

 

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