Quiz Detail

Q1 . Weighted average number of shares considers

A Purchases of treasure stock a reduction to weighted average shares

B Reissuance of treasury stock an increase to weighted average shares

C Stock dividends retroactive to the beginning of the year

D All of the above

Q2 . Fully diluted EPS is computed using

A Current actual earnings and current actual shares outstanding

B Current actual earnings adjusted for potential conversions and all potential shares outstanding given current convertible securities

C Projected earnings and current actual shares outstanding

D Current actual earnings and all potential shares outstanding given all future convertible securities

Q3 . Preferred dividends are not subtracted from net income when computing eps when

A The preferred stock is cumulative and dividends are not declared

B The preferred stock is non cumulative and dividends are not declared

C The preferred stock is cumulative and dividends are declared

D The preferred stock is non cumulative and dividends are declared

Q4 . When computing weighted average per shares, a stock dividend is treated as if it were declared and paid

A At the end of the current year

B On the date it was paid

C At the beginning of the subsequent year

D At the beginning of the current year

Q5 . Earnings per share represents

A Earnings per common share outstanding for the period

B Earnings per all shares of stock issued during the period

C Cumulative earnings per share

D Earning per share authorized for the period

Q6 . When a company declares a stock split

A The number of shares outstanding does not change

B The number of shares issued is decreased

C The number of shares issued and outstanding is increased

D Total shareholder's equity increases

Q7 . Which of the following requires earnings per share for all prior years presented to be restated?

A Issuing stock options to employees

B Stock dividends and stock splits

C The conversion of convertible bonds

D Convertible preferred stock

Q8 . Which of the following is always true relative to earnings per share?

A Earnings per share will never be a negative amount

B Earnings per share is always one amount representing net income

C The company must report earnings per share for continuing operations and all items reported after continuing operations

D All companies , public, private, and non profit must report earning per share.

Q9 . The amount of preferred dividends deducted from net income in the basic earnings per share computing basic or diluted earnings per share

A Total par value x the standard discount rate

B Total preferred shares x par value per share

C Total preferred shares x par value per share * stated rate

D Par value per share x stated rate

Q10 . When a company's preferred shares are non cumulative and a dividend is not declared, basic earnings per share is computed with

A A deduction from net income for the stated preferred dividends

B An addition to net income for the stated preferred dividends

C A deduction from net income for the amount expected to be declared

D Net income is not adjusted for the stated preferred dividend

Q11 . When calculating weight average shares, stock splits

A Are not considered in the weighted average shares calculation

B Are included by adding the additional shares to the total calculation

C And stock dividends are not considered

D Are considered retroactively to the beginning of the year

Q12 . Fully diluted "EPS" is often

A A " worse case scenario" given current earnings

B Very aggressive

C A more accurate picture of the current situation

D Not relevant to a potential investor

Q13 . Fully diluted earnings per share is computed by

A Ignoring basic earnings per share and doing an entirely different calculation

B Adjusting basic earnings per share by potential conversions to common stock

C Adjusting basic earnings per share for income generated from stock options

D Adjusting basic earnings per share for additional interest expense

Q14 . A company with a complex structure must have how many convertible securities?

A At least one

B At least 2

C 3 or more

D 5 or more

Q15 . The " treasury stock method" related to stock options assumes

A Funds received from exercise are used to repay debt

B Funds received from exercise are used to purchase treasury stock

C Funds received from exercise are used retire treasury stock

D Treasury stock is purchased which increases weighted average shares

Q16 . When determining the income that is applicable to common shareholders, dividends relative to non cumulative non convertible preferred stock would be

A Added to net income

B Subtracted to net income

C Ignored unless it was declared during the current period

D Ignored unless it was paid during the current period

Q17 . When a convertible bond is included in Fully diluted EPS

A Interest expense is subtracted from income and weighted average shares are reduced

B Interest expense is included in income and weighted average shares are reduced

C Interest saved is added to income and weighted average shares are reduced

D Interest saved is added to income and weighted average shares are increased

Q18 . THe "if converted" method assumes

A The conversion occurred at the beginning of the year

B The conversion occurred at the end of the year

C The conversion only occurs if the convertible is anti-dilutive

D The convertible was not converted this period

Q19 . What is a common method a company uses to increase basic earnings per share ?

A Purchase treasury stock

B Issue a stock split

C Issue convertible bonds that pay interest

D Do not declare a stated divided on cumulative preferred stock

Q20 . The computation of basic earnings per share does not consider

A Outstanding common shares

B Cumulative preferred stock dividends declared

C Non convertible preferred stock dividends

D None of the above

Q21 . Anti- dilutive occurs when

A Basic eps is greater than fully diluted eps

B Basic eps is less than fully diluted eps

C Basic eps is equal to fully diluted eps

D Convertible securities are not included in fully diluted eps

Q22 . The computation of diluted earning per share assumed cash recieved from the exercise of stock options is used to purchase common stock at

A Fair market value at the end of the year

B Book value at the end of the year

C Average fair market value during the period

D Average book value during the period

Q23 . What method is used to account for stock options when computing diluted earnings per share?

A If converted method

B Treasury stock method

C Option method

D Diluted method

Q24 . When earnings per share is anti- dilutive the company must

A Remove the anti-dilutive convertible security from the computation

B Report basic eps and fully diluted eps as computed

C Only report basic eps

D None of the above

Q25 . Basic weighted average outstanding shares is computed by considering

A The amount of shares outstanding at various times

B The average shares issued during the year

C All convertible security that could potentially be issued

D Total outstanding shares at the end of a period

Q26 . Nonconvertible, cumulative preferred stock where the dividend is not declared impacts the computation of

A Basic earnings per share

B Diluted earnings per share

C Both a and b

D Neither a or b

Q27 . The amount of preferred dividends paid is calculated as

A Total par value of preferred shares * stated %

B The total preferred shares issued * par value * stated %

C The stated % * preferred stock dollars reported on the balance sheet

D All of the above

Q28 . A common stock equivalent is a security that

A Has the potential to decrease outstanding common shares

B Has the same fair market value as the common stock

C Carries voting right equivalent to the common stock

D Has the potential to increase outstanding common shares

Q29 . Shares that may be issued given a contingent situation that is likely to occur are included in

A Basic weighted average shares

B Diluted weighted average shares

C Both a and b

D None of the above

Q30 . When a bond is nonconvertible, the calculation of which of the following is impacted

A Basic earnings per share

B Diluted earnings per share

C Both basic and diluted earnings per share

D Neither basic or diluted earnings per share

Q31 . What is the impact to earnings per share when a company retires common stock that was previously held as treasury stock

A Increase

B Decrease

C No change

D Depends on when during the period the common stock retired

Accounting 2 Study Guide - Earnings Per Share

Q1 . Weighted average number of shares considers

Q2 . Fully diluted EPS is computed using

Q3 . Preferred dividends are not subtracted from net income when computing eps when

Q4 . When computing weighted average per shares, a stock dividend is treated as if it were declared and paid

Q5 . Earnings per share represents

Q6 . When a company declares a stock split

Q7 . Which of the following requires earnings per share for all prior years presented to be restated?

Q8 . Which of the following is always true relative to earnings per share?

Q9 . The amount of preferred dividends deducted from net income in the basic earnings per share computing basic or diluted earnings per share

Q10 . When a company's preferred shares are non cumulative and a dividend is not declared, basic earnings per share is computed with

Q11 . When calculating weight average shares, stock splits

Q12 . Fully diluted "EPS" is often

Q13 . Fully diluted earnings per share is computed by

Q14 . A company with a complex structure must have how many convertible securities?

Q15 . The " treasury stock method" related to stock options assumes

Q16 . When determining the income that is applicable to common shareholders, dividends relative to non cumulative non convertible preferred stock would be

Q17 . When a convertible bond is included in Fully diluted EPS

Q18 . THe "if converted" method assumes

Q19 . What is a common method a company uses to increase basic earnings per share ?

Q20 . The computation of basic earnings per share does not consider

Q21 . Anti- dilutive occurs when

Q22 . The computation of diluted earning per share assumed cash recieved from the exercise of stock options is used to purchase common stock at

Q23 . What method is used to account for stock options when computing diluted earnings per share?

Q24 . When earnings per share is anti- dilutive the company must

Q25 . Basic weighted average outstanding shares is computed by considering

Q26 . Nonconvertible, cumulative preferred stock where the dividend is not declared impacts the computation of

Q27 . The amount of preferred dividends paid is calculated as

Q28 . A common stock equivalent is a security that

Q29 . Shares that may be issued given a contingent situation that is likely to occur are included in

Q30 . When a bond is nonconvertible, the calculation of which of the following is impacted

Q31 . What is the impact to earnings per share when a company retires common stock that was previously held as treasury stock