Colegio de San Juan de Letran

COLLEGE OF BUSINESS ADMINISTRATION AND ACCOUNTANCY

THEORY OF ACCOUNTS

NAME_____________________________________________SECTION_______________

EARNINGS PER SHARE

1. For the purpose of computing the weighted average number of the shares outstanding
during the year, a midyear event that must be treated as occurring at the beginning of the
year is the:
a. Issuance of share warrants.
b. Purchase of treasury share.
c. Sale of additional ordinary shares.
d. Declaration and payment of share dividend.

2. When a corporation has a loss from continuing operations, the:

a. Basic earnings per share is greater than the diluted earnings per share.
b. Basic earnings per share is less than the diluted earnings per share.
c. Basic earnings per share is equal to the diluted earnings per share.
d. Basic earnings per share is not reported.

3. When a corporation has contingently issuable ordinary shares, for which conditions have
not been met for issuance, the shares are included in:
a. Basic earnings per share.
b. Diluted earnings per share.
c. Both earnings per share calculations.
d. Neither earnings per share calculations.

4. The assumed conversion of convertible debt & preference shares in diluted earnings per
share calculations affects:
a. The numerator only.
b. The denominator only.
c. Both the numerator & denominator.
d. Neither the numerator & denominator.

5. Given the following convertible securities, determine their impact on diluted earnings per
share calculations:
I. 10% convertible preference shares. Dividends of P6,000 declared during the
year. The shares are convertible into 2,500 ordinary shares.
II. 8% convertible bonds. Interest expense (net of taxes) was P4,000. The
bonds are convertible into 1,600 ordinary shares.
III. 6% convertible bonds. Interest expense (net of taxes) was P7,000. The
bonds are convertible into 3,500 ordinary shares.
a. I, II, III
b. III, II, I
c. II, I, III
d. I, III, II

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