On January 1, a corporation had 10,380 shares of common ...



On January 1, a corporation had 10,380 shares of common stock outstanding. On August 1, it sold an additional 6,000 shares. During the year, dividends of $4,800 and $56,000 were declared and paid on the common and preferred stock, respectively. Net income for the year was $240,000. The basic earnings per share for the year was (Points: 2)

$10.56

$11.23

$14.29

$18.63

2. When a corporation has contingently issuable common stock for which the conditions have not been met for issuance, the shares are included in (Points: 2)

basic earnings per share

diluted earnings per share

both basic and diluted earnings per share calculations

neither basic nor diluted earnings per share calculations

3. Which statement best reflects the issues associated with the computation of diluted earnings per share? (Points: 2)

Diluted earnings per share represents the potential impact of all shares of common stock.

When presenting comparative financial statements, the impact of convertible bonds must be included for both years.

Common stock options are considered dilutive when the average market price is greater than the option price.

The impact on the denominator is always the determinate of whether or not to use diluted earnings per share.

4. In calculating earnings per share, a company uses the treasury stock method when (Points: 2)

it needs to value the cash received for a convertible bond

it recognizes the assumed impact of exercising outstanding warrants

it develops a methodology to handle the premium paid on exercised stock options

it needs to value treasury stock repurchased during the year

5. All of the following types of dividends will result in an increase in liabilities as a result of recording the declaration of a dividend except a (Assume the dividends are paid or distributed on a later date.) (Points: 2)

cash dividend

property dividend

scrip dividend

stock dividend

6. Aster Corp. has $1,000,000, 6%, nonconvertible bonds due in 2015 and $1,500,000, 3%, convertible bonds due in 2012. The basic earnings per share is $1.25 and the diluted earnings per share is $1.18. Based upon this information, Aster must disclose (Points: 2)

basic earnings per share because the convertible bonds are not dilutive

basic earnings per share and dilutive earnings per share because the convertible bonds are dilutive

basic earnings per share, and the convertible bonds must be disclosed in the stockholders' equity section of the balance sheet

basic earnings per share and dilutive earnings per share, and the convertible bonds must be disclosed in the stockholders' equity section of the balance sheet

7. On November 1, 2010, the Metal Construction Company declared a property dividend payable in the form of bonds held for long-term investment purposes. The bonds will be distributed to the common stockholders on December 15, 2010. The bonds to be distributed to the common stockholders originally cost Metal $210,000. Fair value of the bonds on various dates is as follows:

December 31, 2009 $220,000

November 1, 2010 225,000

December 15, 2010 230,000

Which one of the following amounts should be used to record the appropriate credit to Property Dividends Payable? (Points: 2)

$210,000

$220,000

$225,000

$230,000

8. The Zoeller Corporation's stockholders' equity accounts have the following balances as of December 31, 2010:

|Common stock, $10 par (30,000 shares |$ 300,000 |

|issuedand outstanding) | |

|Additional paid-in capital |2,000,000 |

|Retained earnings |5,700,000 |

|Total stockholders' equity |$8,000,000 |

On January 2, 2011, the board of directors of Zoeller declared a 30% stock dividend to be distributed on January 31, 2011. The market price per share of Zoeller's common stock was $30 on January 2 and $32 on January 31. As a result of this stock dividend, the retained earnings account should be decreased by (Points: 2)

$90,000

$270,000

$288,000

zero; only a memorandum entry is required

9. Under the treasury stock method, the number of shares of common stock assumed to be reacquired is determined by using the (Points: 2)

ending market price of the stock

average market price of the stock

beginning market price of the stock

par value of the stock

10. The Farmer Company has issued 10%, fully participating, cumulative preferred stock with a total par value of $300,000 and common stock with a total par value of $900,000. Dividends for one previous year are in arrears. How much cash will be paid to the preferred stockholders and the common stockholders, respectively, if cash dividends of $222,000 are distributed at the end of the current year? (Points: 2)

$85,500 and $136,500

$78,000 and $144,000

$60,000 and $162,000

$55,500 and $166,500

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