Bakersfield College

ACG 2021

1)On December 31, 2015, the Bennett Company had 100,000 shares of common stock issued and outstanding. On July 1, 2016, the company sold 20,000 additional shares for cash. Bennett's net income for the year ended December 31, 2016, was $650,000. During 2016, Bennett declared and paid $89,000 in cash dividends on its nonconvertible preferred stock. What is the 2016 basic earnings per share?

a. $5.91.

b. $5.61.

c. $5.10.

d. None of these answer choices is correct.

2. Getaway Travel Company reported net income for 2016 in the amount of $50,000. During 2016, Getaway declared and paid $2,000 in cash dividends on its nonconvertible preferred stock. Getaway also paid $10,000 cash dividends on its common stock. Getaway had 40,000 common shares outstanding from January 1 until 10,000 new shares were sold for cash on July 1, 2016. A 2-for-1 stock split was granted on July 5, 2016. What is the 2016 basic earnings per share (rounded)?

a. $.42.

b. $.47.

c. $.53.

d. $.56.

3. Baldwin Company had 40,000 shares of common stock outstanding on January 1, 2016. On April 1, 2016, the company issued 20,000 shares of common stock. The company had outstanding fully vested incentive stock options for 10,000 shares exercisable at $10 that had not been exercised by its executives. The average market price of common stock for the year was $12. What number of shares of stock (rounded) should be used in computing diluted earnings per share?

a. 65,000.

b. 56,667.

c. 55,000.

d. 46,667.

4. Blue Cab Company had 50,000 shares of common stock outstanding on January 1, 2016. On April 1, 2016, the company issued 20,000 shares of common stock. The company had outstanding fully vested incentive stock options for 5,000 shares exercisable at $10 that had not been exercised by its executives. The end-of-year market price of common stock was $13 while the average price for the year was $12. The company reported net income in the amount of $269,915 for 2016. What is the diluted earnings per share (rounded)?

a. $3.60.

b. $4.10.

c. $4.50.

d. $3.81.

5. Purple Cab Company had 50,000 shares of common stock outstanding on January 1, 2016. On April 1, 2016, the company issued 20,000 shares of common stock. The company had outstanding fully vested incentive stock options for 5,000 shares exercisable at $10 that had not been exercised by its executives. The average market price of common stock was $12. The company reported net income in the amount of

$269,915 for 2016. What is the basic earnings per share (rounded)? a. $4.10.

b. $3.86.

c. $3.60.

d. $4.15.

6. Burnet Company had 30,000 shares of common stock outstanding on January 1, 2016. On April 1, 2016, the company issued 15,000 shares of common stock. The company had outstanding fully vested incentive stock options for 5,000 shares exercisable at $10 that had not been exercised by its executives. The average market price of common stock was $9. The company reported net income in the amount of

$189,374 for 2016. What is the effect of the options?

1. The options are antidilutive.
2. The options will dilute EPS by $.09 per share.
3. The options will dilute EPS by $.33 per share.
4. The options will dilute EPS by $.17 per share.

7. Dulce Corporation had 200,000 shares of common stock outstanding during the current year. There were also fully vested options for 10,000 shares of common stock were granted with an exercise price of

$20. The market price of the common stock averaged $25 for the year. Net income was $4 million. What is diluted EPS (rounded)?

a. $20.00.

b. $19.80.

c. $19.23.

d. $18.18.

8. Cracker Company had 2 million shares of common stock outstanding all through 2015. On April 1, 2016, an additional 100,000 shares were sold and issued. On September 30, 2016, Cracker declared a 2- for-1 stock split. Net income in 2016 and 2015 was $10 million and $8 million, respectively. In the 2016 comparative financial statements, EPS (rounded) would be reported as follows:

9. Dublin Inc. had the following common stock record during the current calendar year:

A 10% stock dividend was paid on December 1. What is the number of shares to be used in computing basic EPS?

a. 2,075,000.

b. 2,282,500.

c. 2,475,000.

d. 2,620,000.

10. Morrison Corporation had the following common stock record during the current calendar year:

What is the number of shares to be used in computing basic EPS? a. 2,000,000.

b. 2,205,000.

c. 2,307,500.

d. 2,335,000.

11. Gear Corporation had the following common stock record during the current calendar year:

What is the number of shares to be used in computing basic EPS? a. 5,500,000.

b. 4,210,000.

c. 5,303,750.

d. 5,050,000.

12. When computing earnings per share, noncumulative preferred dividends not declared should be:

1. Ignored.
2. Deducted from earnings for the year.
3. Added to earnings for the year.
4. Deducted, net of tax effect, from earnings for the year.

13. A company has cumulative preferred stock. When computing earnings per share, the current year’s dividends not declared on the preferred stock should be:

1. Deducted from earnings for the year.
2. Deducted, net of tax effect, from earnings for the year.
3. Added to earnings for the year.
4. Ignore

14. At December 31, 2016 and 2015, G Co. had 50,000 shares of common stock and 5,000 shares of 5%,

$100 par value cumulative preferred stock outstanding. No dividends were declared on either the preferred or common stock in 2016 or 2015. Net income for 2016 was $500,000. For 2016, basic earnings per common share amounted to:

a. $ 5.00.

b. $ 9.50.

c. $ 9.00.

d. $10.00.

15. Preferred dividends are subtracted from earnings when computing basic earnings per share whether or not the dividends are declared or paid if the preferred stock is:

1. Callable.
2. Convertible.
3. Participating.
4. Cumulative.