Info
Warning
Danger

Study Resources (Accounting)

11) Explain why the IASB requires the disclosure of basic and diluted EPS. 12) Explain the difference between basic and diluted EPS. 13) Which of the following is correct about the difference between basic earnings per share (EPS) and diluted earnings per share? A) Basic EPS uses total common shares outstanding, whereas diluted.
7 Views
View Answer
12) A company issued 100,000 preferred shares and received proceeds of $5,750,000. These shares have a par value of $50 per share and pay cumulative dividends of 6%. Buyers of the preferred shares also received a detachable warrant with each share purchased. Each warrant gives the holder the right to.
7 Views
View Answer
13) How should employee stock options be accounted for? A) Historical cost. B) Fair value through profit or loss. C) Amortized cost. D) Fair value. 14) Which is a derivative on the company's own common shares? A) Interest rate swap contract. B) Foreign exchange forward contract. C) Employee stock option. D) Commodity futures contract. 15) Which is a derivative on.
5 Views
View Answer
14.4   Learning Objective 4 1) Which method must be used under IFRS to account for employee stock options? A) Intrinsic value of options. B) Time value of options. C) Market value of the shares. D) Fair value of the options. 2) Which statement is correct about the accounting for employee stock options? A) The expense is recorded.
6 Views
View Answer
16.1   Learning Objective 1 1) Which statement is correct? A) Financial reporting rules are generally consistent with tax reporting rules. B) Tax rules are generally consistent the principles used in accrual accounting. C) Tax rules generally require a higher degree of reliability than financial reporting. D) Accounting income is generally similar to taxable income. 2) Which.
19 Views
View Answer
15.4   Learning Objective 4 1) Which statement is correct? A) Out of the money stock options are the most dilutive. B) Convertible bonds are the most dilutive. C) Convertible preferred shares are the most dilutive. D) In the money stock options are the most dilutive. 2) Which statement is correct about diluted EPS? A) The incremental EPS.
6 Views
View Answer
15) A company had a debt-to-equity ratio of 1.55 before issuing convertible bonds. This ratio included $500,000 in equity. The company issued convertible bonds. The value reported for the bonds on the balance sheet is $180,000 and the conversion rights are valued at $22,000. Requirement: After the issuance of the convertible bonds,.
6 Views
View Answer
5) McMillan Manufacturing issued 60,000 stock options to its employees. The company granted the stock options at-the-money, when the share price was $40. These options have no vesting conditions. By year-end, the share price had increased to $42. McMillan's management estimates the value of these options at the grant date.
7 Views
View Answer
20) Explain why only in-the-money options need be considered in the diluted EPS calculations. 21) Two different companies have many similarities, including the following: •They all earned net income of $3,500,000 for the year ended December 31, 2017; •They are all subject to a 35% tax rate; •The average price of the companies' ordinary.
6 Views
View Answer
10) A company issued 105,000 preferred shares and received proceeds of $7,000,000. These shares have a par value of $50 per share and pay cumulative dividends of 6%. Buyers of the preferred shares also received a detachable warrant with each share purchased. Each warrant gives the holder the right to.
10 Views
View Answer
15.2   Learning Objective 2 1) Which statement is correct about basic EPS? A) It indicates the profitability attributable to a company's dilutive shares. B) It indicates the profitability attributable to a company's ordinary shares. C) It indicates the market price attributable to a company's ordinary shares. D) It indicates the market price attributable to a.
6 Views
View Answer
35) Accu Tech Renovations Corp. (ATRC) was incorporated on January I, 2014. At that time it issued 100,000 ordinary shares; 80,000, $20, 3% preferred shares "A"; and 40,000, $20, 6% preferred shares "B." Net income for the year ended December 31, 2014 was $1,800,000. ATRC declares and pays total of.
3 Views
View Answer
27) For stock splits and stock dividends, while it is possible to state the number of shares as beginning-of-year equivalents, it makes more sense to use end-of-year equivalents because financial statement readers are evaluating EPS after the end of the year. Explain why the adjustment for stock splits and stock.
5 Views
View Answer
11) Which statement is not correct? A) The accrual method focuses on the balance sheet. B) The deferral method focuses on the income statement. C) The deferral methods matches tax expense to the balance sheet. D) The accrual and deferral methods are both tax allocation methods. 12) Which method reflects the tax effect in the.
10 Views
View Answer
22) Which statement best describes the "proportional method"? A) Under this method of accounting, for a convertible bond, all of the bond value would be counted as a liability. B) Under this method of accounting, for a convertible bond, the issuing entity would record a liability for the estimated value of the.
7 Views
View Answer
14) Explain how the dividends on cumulative preferred shares are adjusted in the EPS calculation. What is the underlying logic for this adjustment? 15) Explain how the dividends on cumulative preferred shares are adjusted in the EPS calculation. What is the underlying logic for this adjustment? 16) XYZ Company has 500,000 common.
10 Views
View Answer
33) For the year ended December 31, 2015, Jovial Productions Inc. earned $13,000,000. Outstanding preferred shares included $1,500,000 in 9% cumulative preferred shares issued on January 1, 2012 and 32,000 $160 non-cumulative preferred shares issued on January 1, 2014 that are each entitled to dividends of $7 per annum. Dividends.
7 Views
View Answer
14.5   Learning Objective 5 1) What is a "hedge"? A) A financial instrument that is speculative and increases the risk for the company. B) An instrument that moves in the opposite direction to another financial asset or liability. C) An instrument that moves in the same direction as another financial asset or liability. D) A.
3 Views
View Answer
37) Accu Tech Renovations Corp. (ATRC) was incorporated on January I, 2014. At that time it issued 100,000 ordinary shares; 80,000, $20, 3% preferred shares "A"; and 40,000, $20, 6% preferred shares "B." Net income for the year ended December 31, 2014 was $1,800,000. ATRC declares and pays total of.
5 Views
View Answer
14.2   Learning Objective 2 1) How should warrants on the company's own common shares be accounted for? A) Fair value. B) Fair value through profit or loss. C) Amortized cost. D) Historical cost. 2) How are derivative contracts generally accounted for? A) Fair value. B) Fair value through profit or loss. C) Amortized cost. D) Historical cost. 3) Assume that Ariel.
6 Views
View Answer
15.3   Learning Objective 3 1) Which statement is correct? A) Diluted EPS will always be less than basic EPS. B) Diluted EPS will always be greater than basic EPS. C) Diluted EPS will always be equal to EPS. D) Diluted EPS will be less than or equal to basic EPS. 2) Which statement is correct? A) The.
6 Views
View Answer
30) For the year ended December 31, 2011, Harvest Productions Inc. earned $4,000,000. Outstanding preferred shares included $400,000 in 3% cumulative preferred shares issued on January 1, 2010 and $500,000 in 2% non-cumulative preferred shares issued on January 1, 2011. Dividends on the cumulative preferred shares were not declared in.
9 Views
View Answer
41) Summer Surprise Ltd. (SSL) was incorporated on January 1,2014. At that time, it issued 210,000 ordinary shares; 95,000, $65, 2% preferred shares "A"; and 85,000, $65, 4% preferred shares "B." Net income for the year ended December 31, 2014 was $500,000. SSL neither declares nor pays dividends during the.
5 Views
View Answer
22) Two different companies have many similarities, including the following: •They all earned net income of $3,500,000 for the year ended December 31, 2017; •They are all subject to a 35% tax rate; •The average price of the companies' ordinary shares during the year was $26; and •Each company had 1,400,000 ordinary shares outstanding.
11 Views
View Answer
43) Summer Surprise Ltd. (SSL) was incorporated on January 1,2014. At that time, it issued 210,000 ordinary shares; 95,000, $65, 2% preferred shares "A"; and 85,000, $65, 4% preferred shares "B." Net income for the year ended December 31, 2014 was $500,000. SSL neither declares nor pays dividends during the.
9 Views
View Answer
17) In the table below, choose the financial instrument that best explains the example on the right side. Types of financial instrument to select from: Financial asset, financial liability, equity, compound instrument, basic option, swap, forward, future, warrant, put option, or call option. 18) Explain how bonds issued with warrants alleviate.
9 Views
View Answer
11) Which statement is correct? A) Issued options are always anti-dilutive. B) Issued options are always dilutive. C) Purchased options are always anti-dilutive. D) Purchased options are always dilutive. 12) Which statement is correct? A) Dilutive potential ordinary shares, if converted, will decrease EPS or decrease the loss per share from continuing operations. B) Dilutive potential ordinary.
6 Views
View Answer
15.1   Learning Objective 1 1) Which statement is correct about earnings per share (EPS)? A) A company's total earning is more meaningful than its EPS. B) EPS represents the total amount of earnings of a company. C) EPS represents an ordinary share's interest in the company. D) The EPS is directly correlated with the company's.
13 Views
View Answer
17) Ned Company reported the following information for its fiscal year: Net income $500,000 Preferred dividends 30,000 Common share dividends 20,000 Preferred shares are cumulative and carry an annual dividend of 10,000 The preferred dividends listed above include the current year and prior accumulated dividends. What is the amount of net income available to common shareholders? A) $440,000 B) $450,000 C) $470,000 D).
7 Views
View Answer
45) Micky and Donald Corp. was founded on January I, 2013. At that time it issued 120,000 ordinary shares and 20,000, $30, cumulative 5% preferred shares. Subsequent transactions affecting its shareholdings follow. 2013 •September 1: Micky issued 300,000, $30, non-cumulative 6% preferred shares. •December 1: Micky issued 80,000 ordinary shares. •Dividends were not declared.
5 Views
View Answer
11) Calculate the income effect on the incremental EPS for the following instrument: Convertible bonds outstanding, yield of 8% and coupon rate of 8% $5,000,000 Issue date January 1, 2015 Maturity date December 31, 2022 Conversion rate for each $1,000 bond 25 ordinary shares Income tax rate 30% A) $0.96 B) $2.24 C) $120,000 D) $280,000 12) Calculate the income effect on the incremental EPS.
3 Views
View Answer
14.1   Learning Objective 1 1) Which of the following is correct about financial instruments? A) Accounting for financial instruments has been consistent. B) There is no economic substance to financial instruments. C) They are often designed to circumvent accounting standards. D) All financial instruments are accounted for at fair value. 2) Which statement is correct about.
19 Views
View Answer
14) The following is an extract from the balance sheet as at December 31, 1011: Preferred shares, $10 per share non-cumulative dividend, redeemable$525,000 at $15 per share, 250,000 authorized, 25,000 issued and outstanding Common stock, 60,000,000 authorized, 6,000,000 issued and outstanding              6,019,233 Contributed surplus—preferred shares from repurchase and resales150,000 Retained earnings9,281,092 The company did not declare.
18 Views
View Answer
6) A company issues convertible bonds with face value of $10,000,000 and receives proceeds of $10,500,000. Each $1,000 bond can be converted, at the option of the holder, into 800 common shares. The underwriter estimated the market value of the bonds alone, excluding the conversion rights, to be approximately $8,300,000. Requirement: Record.
9 Views
View Answer
14.3   Learning Objective 3 1) Which method is used under IFRS to account for compound instruments? A) Fair value method. B) Proportional method. C) Incremental method. D) Zero common equity method. 2) Which statement best describes the "zero common equity method"? A) Under this method of accounting, for a convertible bond, all of the bond value would.
8 Views
View Answer
24) Know Your Rights Co. has three stock option plans outstanding on December 31, 2015. They provide the holders with the following entitlements: •Stock option A—The holders may purchase 55,000 ordinary shares at any time on or before December 31, 2019 for $41 each. •Stock option B—The holders may purchase 2,000 ordinary.
4 Views
View Answer