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Enterthelettercorrespondingtotheresponsethatbestcompleteseachofthefollowingstatementsorquestions.
OnJanuary1,2013,OlympicInsuranceCompanygranted30,000stockoptionstocertainexecutives.Theoptionsareexercisablenosooner
thanDecember31,2015andexpireonJanuary1,2016.Eachoptioncanbeexercisedtoacquireoneshareof\$1parcommonstockfor\$12.
Anoptionpricingmodelestimatesthefairvalueoftheoptionstobe\$5onthedateofgrant.ThemarketpriceofOlympic'sstockwasas
follows:

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WhatamountshouldOlympicrecognizeascompensationexpensefor2013?
A) \$10,000.
B) \$20,000.
C) \$30,000.
D) \$50,000.

Whichofthefollowingstatementsisuntrueregardingearningspershare?
A) Acompanyhasasimplecapitalstructureifithasnooutstandingsecuritiesthatcouldpotentiallydiluteearningspershare.
B) Whensharesareretired,theyaretimeweightedforthefractionoftheperiodtheywerenotoutstanding,priortobeingsubtracted
fromthenumberofsharesoutstandingduringthereportingperiod.
C) Dividendspaidonnonconvertiblepreferredstockoutstandingshouldbesubtractedfromreportednetincome.
D) Anynewsharesissuedduringtheperiodinastockdividendorstocksplitaretimeweightedbythefractionoftheperiodtheywere

preferredstock.Netincomefor2014was\$20million.Nodividendsweredeclaredin2013or2014.EPSfor2014was:
A) \$.32.
B) \$.37.
C) \$.40.
D) \$.48.

AtDecember31,2013,thebalancesheetofGoodeCorporationincluded80millioncommonshares.OnOctober1,2014,Gooderetired4
millionsharesaspartofasharerepurchaseprogram.NetincomefortheyearendedDecember31,2014,was\$400million.Goode's2014
EPSshouldbe:
A) \$4.94.
B) \$5.00.
C) \$5.06.
D) \$5.26.

AtDecember31,2013,thebalancesheetofDarwinCorporationincluded8millioncommonsharesand4millionnonconvertiblepreferred
shares.OnJuly1,2014,Darwinissueda5for4stocksplitonitscommonsharesandpaid\$10millioncashdividendsonthepreferredstock.
NetincomefortheyearendedDecember31,2014,was\$40million.Darwin's2014EPSshouldbe:
A) \$3.00.
B) \$4.00.
C) \$5.00.
D) \$5.55.

Whencalculatingbasicearningspershare,netincomeisreducedbydividendsonnonconvertiblecumulativepreferredstock:
A) Whetherdeclaredornot.
B) Onlyifdeclared.
C) Whetherdilutiveornot.
D) Undernocircumstances.

Whencalculatingtheweightedaveragenumberofsharesoutstanding,thenumberofsharesarenottimeweightedbythefractionofthe
reportingperiodtheyare(arenot)outstandingfor:
A) Commonsharesretired.
B) Commonsharesissuedduringtheperiodasastockdividend.
C) Sharesobtainableinexecutivestockoptionsgrantedinmidyear.
D) Newcommonsharessoldduringtheperiod.

A) Threetypesofsecuritiesormorebesidescommonstock.
B) Executivestockoptions.
C) Bondspayable.
D) Cumulativepreferredstock.

ToincorporatetheeffectofoutstandingstockoptionsinthecalculationofdilutedEPS:

A) WouldbeinappropriatebecauseoptionsareconsideredonlywhencalculatingbasicEPS.
B) WewouldneverincreaseordecreasethenumeratoroftheEPSfraction.
C) Weassumecommonsharesareissuedattheaveragemarketpriceandrepurchasedattheexerciseprice.
D) Weassumetheoptionswereexercisedatmidyear.

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WhencalculatingdilutedEPS,whichofthefollowing,ifdilutive,wouldcausetheweightedaveragenumberofsharestoincrease?
A) Dividendsonpreferredstock:YesStockoptions:No
B) Dividendsonpreferredstock:YesStockoptions:Yes
C) Dividendsonpreferredstock:NoStockoptions:Yes
D) Dividendsonpreferredstock:NoStockoptions:No

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Whencalculatingearningspershare,theeffectofaftertaxinterestexpensepaidonconvertiblebondsthataredilutiveisto:
A) Increasenetincomefordilutedearningspershareandnotforbasicearningspershare.
B) Decreasenetincomeforbasicearningspershareandnotfordilutedearningspershare.
C) Increasenetincomeforbothbasicearningspershareanddilutedearningspershare.
D) Decreasenetincomeforbothbasicearningspershareanddilutedearningspershare.

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Commonstockoptionsthatareantidilutivegenerallyaffectthecalculationof:
A) BasicEPS:YesDilutedEPS:Yes
B) BasicEPS:YesDilutedEPS:No
C) BasicEPS:NoDilutedEPS:No
D) BasicEPS:NoDilutedEPS:Yes

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Convertiblebondsthataredilutivegenerallyaffectthecalculationof:
A) BasicEPS:YesDilutedEPS:No
B) BasicEPS:YesDilutedEPS:No
C) BasicEPS:NoDilutedEPS:No
D) BasicEPS:NoDilutedEPS:Yes

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thecommonstockwas\$60.Whencalculatingdilutedearningspershare,theassumedexerciseoftheseoptionswillincreasetheweighted
averagenumberofsharesoutstandingby:
A) zeroshares.
B) 2millionshares.
C) 8millionshares.
D) 10millionshares.

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thecommonstockwas\$50.Whencalculatingdilutedearningspershare,theassumedexerciseoftheseoptionswillincreasetheweighted
averagenumberofsharesoutstandingby:
A) zeroshares.
B) 2millionshares.
C) 8millionshares.
D) 10millionshares.

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Whichofthefollowingstatementsistrueregardingdilutedearningspershare?
A) Itisassumedthatstockoptionsareexercisedatthebeginningoftheperiod(oratthetimetheoptionsareissued,iflater)andthe
pricefortheperiod.
sharesassumed.
C) Toincorporateconvertiblesecuritiesintothecalculation,thenumeratorisdecreasedbytheinterest(aftertax)thatwouldhavebeen
avoidedintheeventofconversion.
D) ContingentlyissuablesharesareconsideredoutstandinginthecomputationofdilutedEPSwhenanyconditionsforissuanceare
currentlybeingmet.

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Whichofthefollowingisnotdisclosedregardingearningspershare?
A) BasicEPSforincomefromcontinuingoperations.
B) DilutedEPSfornetincome.
C) Cashpaidpershare.
D) Reconciliationofthenumeratoranddenominatorusedinthecomputations.

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Whatisthecompensationexpenserelatedtotheoptionstoberecordedin2014?
A) \$96,000.

B) \$192,000.
C) \$256,000.
D) \$280,000.

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AssumingBluepreparesitsfinancialstatementsinaccordancewithInternationalFinancialReportingStandards,whatisthecompensation
expenserelatedtotheoptionstoberecordedin2014?
A) \$40,000.
B) \$60,000.
C) \$95,000.
D) \$130,000.

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