EARNINGS PER SHARE June 1, Argonaut issued an additional 60,000 common shares.

Argonaut has no treasury

Types of Earnings per Share stock. The weighted average number of common shares outstanding for the year was
Basic Earnings per Share ________.
One Class of Share Capital A. 500,000 C. 530,000
Average Outstanding Shares B. 560,000 D. 535,000 Reimers 3e
Two Classes of Share Capital
Diluted Earnings per Share 20. Albatross Shipping had 100,000 shares of common stock outstanding on January 1. On
Basic Loss per Share September 1, Albatross issued an additional 30,000 common shares. Albatross has no
treasury stock. The weighted average number of common shares outstanding for the year was
________.
Basic EPS A. 100,000 C. 115,000
Numerator B. 130,000 D. 110,000 Reimers 3e
24. Jennings Corporation’s net income for the current year was $285,000. The corporation had
2
outstanding 4,000 shares of 10%, $100 par value nonconvertible preferred stock and 10,000 . On January 1, 2006, Patriot Corporation had 55,000 shares of $6 par value common stock
shares of $20 par value common stock. No shares were issued or retired during the year. The outstanding. On March 31, 2006, Patriot issued an additional 10,000 shares in exchange for a
amount of income to be used in the basic calculation of earnings per share: building. What number of shares will be used in the computation of basic EPS for the year
a. $285,000 c. $245,000 2006?
b. $350,000 d. $685,000 A. 55,000. C. 62,500.
B. 65,000. D. 62,000.
1
. Jennings Corporation's net income for the current year was $270,000. The corporation had
3
outstanding 5,000 shares of 10%, $100 par value nonconvertible preference shares and . Deck Co. had 120,000 shares of common stock outstanding at January 1, 1998. On July 1,
10,000 shares of $20 par value ordinary shares. No shares were issued or retired during the 1998, it issued 40,000 additional shares of common stock. Outstanding all year were 10,000
year. The amount of income to be used in the basic calculation of earnings per share is: shares of nonconvertible cumulative preferred stock. What is the number of shares that Deck
A. $350,000. C. $220,000. should use to calculate 1998 earnings per share? (E)
B. $285,000. D. $245,000. HHT&S 8e a. 140,000 c. 160,000
b. 150,000 d. 170,000 AICPA R01
25. A firm has the following accounts and financial data for 2002:
4
Sales Revenue $ 3,060 Cost of goods sold $1,800 . The following capital stock information pertains to Palisades Corporation:
Accounts Receivable 500 Preferred stock dividends 18 Number of shares issued Amount
Interest expense 126 Tax rate 40% Common stock, $10 par value; 300,000 shares authorized:
Total oper. expenses 600 Number of shares of common January 1, 2010 45,000 $450,000
Accounts payable 240 stocks outstanding 1,000 Sold on May 1, 2010 3,000 30,000
The firm's earnings available to common shareholders for 2002 are ______. Total, December 31, 2010 48,000 $480,000
A. -$224 C. $302 Preferred stock, 9% cumulative nonconvertible,
B. $195 D. $516 Gitman $100 par value; 10,000 shares authorized 1,000 $100,000
The number of shares on which the 2010 basic earnings per share computation should be
Weighted-average number of shares based is
Issuance A: 46,500 C: 48,000
18. Argonaut Enterprises had 500,000 shares of common stock outstanding on January 1. On B: 47,000 D: 49,000 Wiley 2011
 shares on May 1, purchased 42,000 shares of treasury stock on September 1, and issued
Issuance, Stock Dividends 36,000 shares on November 1. The weighted average shares outstanding for the year is
5
. Siva Inc. had 20,000 shares of common stock outstanding on January 1. On May 1, 4,000 a. 634,000. c. 662,000.
shares were issued; on July 17, a 20% stock dividend was issued; and on September 1, 3,000 b. 648,000. d. 676,000. K, W & W
additional shares were issued. What is Siva Inc.'s earnings per share denominator?
A. 31,800 C. 28,200 Issuance, repurchase, repurchase
B. 32,400 D. 25,267 Gleim Questions 155 and 156 are based on the following information. CIA 0595 IV-79 & 80
An enterprise had the following number of shares outstanding during the year:
6
. Drake had the following common stock record during the current calendar year: Period Shares Outstanding
Outstanding - beginning of year 4,000,000 January 1 - April 30 60,000
Additional shares issued 6/30 100,000 May 1 - June 30 96,000
Additional shares issued 9/30 100,000 July 1 - September 30 90,000
A 10% stock dividend was paid on December 1. What is the number of shares to be used in October 1 - December 31 70,000
computing basic EPS? During the year, the enterprise had net profit of 600,000. It paid 100,000 in preference dividends,
A. 4,075,000. C. 4,475,000. declared and paid 250,000 of common share dividends, and paid 50,000 of interest to debt
B. 4,482,500. D. 4,620,000. S, S & T holders.
Issuance, Stock Dividends, Repurchase 9
. The number of shares the enterprise had outstanding for the year, for the purpose of
7
. Gear Corporation had the following common stock record during the current calendar year: computing basic earnings per share (BEPS), is
Outstanding - January 1 5,000,000 A. 65,000 C. 76,000
Additional shares issued 3/31 100,000 B. 70,000 D. 79,000
Distributed a 10% stock dividend on 6/30
Shares reacquired 9/30 100,000 10
. The formula the enterprise will use in computing basis earnings per share is
What is the number of shares to be used in computing basic EPS? A.
A. 5,500,000. C. 5,555,000.
B. 5,557,500. D. 5,050,000. S, S & T
B.
Issuance, Stock Dividends, Issuance
8
. Fax Corporation had the following common stock record during the current calendar year:
Outstanding - January 1 4,000,000 C.
Additional shares issued 3/31 100,000
Distributed a 10% stock dividend on 6/30 D.
Additional shares issued 9/30 100,000
What is the number of shares to be used in computing basic EPS?
A. 4,100,000. C. 4,510,000.
B. 4,200,000. D. 4,507,500. S, S & T Stock Dividend
49. On December 1, 1993, Clay Co. declared and issued a 6% stock dividend on its 100,000
Issuance, repurchase, reissuance shares of outstanding common stock. There was no other common stock activity during 1993.
59. Loeb Co. had 600,000 shares of common stock outstanding on January 1, issued 84,000 What number of shares should Clay use in determining earnings per share for 1993?
 a. 100,000 c. 103,000 2/1/10 Issued a 10% common stock dividend 3,000
b. 100,500 d. 106,000 AICPA 0594 7/1/10 Issued common stock for cash 8,000
12/31/10 Common stock outstanding 50,000
Stock Dividend, Issuance What was Timp’s 2010 weighted-average shares outstanding?
11
. A company had 150,000 shares outstanding on January 1. On March 1, 75,000 additional A: 40,000 C: 44,500
shares were issued through a stock dividend. Then on November 1, the company issued B: 44,250 D: 46,000 Wiley 2011
60,000 shares for cash. The number of shares to be used in the denominator of the EPS
calculation for the year is 59. Timp, Inc. had the following common stock balances and transactions during 1991:
A. 222,500 shares. C. 235,000 shares. 1/1/91 Common stock outstanding 30,000
B. 225,000 shares. D. 285,000 shares. CIA 0596 IV-33 2/1/91 Issued a 10% common stock dividend 3,000
3/1/91 Issued common stock in a pooling of interests 9,000
16. On January 1, 19_3, Whalen, Inc. had 120,000 shares of common stock outstanding. A 7/1/91 Issued common stock for cash 8,000
10% stock dividend was issued on April 1, 19_3. Whalen issued 40,000 shares of common 12/31/91 Common stock outstanding 50,000
stock for cash on July 1, 19_3. What is the number of shares that should be used in What was Timp’s 1991 weighted-average shares outstanding?
computing earnings per share for the year ended December 31, 19_3? a. 40,000 c. 44,500
a. 146,000 c. 152,000. b. 44,250 d. 46,000 AICPA 0592, RPCPA 1095
b. 149,000. d. 172,000. (03-22)
12
. The following information pertains to Ceil Co., a company whose common stock trades in a 3. Bokod Company had the following transactions during 2003:
public market: January 1, Common stock outstanding 100,000
Shares outstanding at 1/1 100,000 March 1, 30% stock dividend 30,000
Stock dividend at 3/31 24,000 April 1, Common stock issued in a pooling of interest 50,000
Stock issuance at 6/30 5,000 July 1, Issued common stock for cash 40,000
What is the weighted-average number of shares Ceil should use to calculate its basic earnings What is the average number of common shares outstanding in 2003?
per share for the year ended December 31? A. 200,000 C. 187,500
A: 120,500 C: 126,500 B. 220,000 D. 182,500 CPAR 4153
B: 123,000 D: 129,000 AICPA R07
13
28. Carmichael, Inc. had the following common stock balances and transactions during 1996:
. Timp, Inc. had the following common stock balances and transactions during 2003: 1/1/96 Common stock outstanding 60,000
1/1/03 Common stock outstanding 30,000 2/1/96 Issued a 10% common stock dividend 6,000
2/1/03 Issued a 10% common stock dividend 3,000 3/1/96 Issued a common stock in a pooling of interests 18,000
7/1/03 Issued common stock for cash 8,000 7/1/96 Issued common stock for cash 16,000
12/31/03 Common stock outstanding 41,000 12/31/96 Common stock outstanding 100,000
What were Timp’s 2003 weighted-average shares outstanding? What was Carmichael’s 1996 weighted-average shares outstanding?
a. 30,000 c. 36,750 a. 80,000 c. 88,500
b. 34,000 d. 37,000 Wiley 04-05 b. 92,000 d. 89,000 RPCPA 1097
14
. Timp, Inc. had the following common stock balances and transactions during 2010: Questions 30 through 33 are based on the following information. CMA 1291 2-19 to 22
1/1/10 Common stock outstanding 39,000 Sands, Inc. uses a calendar year for financial reporting. The company is authorized to issue
5,000,000 shares of $10 par common stock. At no time has Sands issued any potentially dilutive thousand shares of common stock were reacquired as treasury stock. What is the appropriate
securities. A two-for-one stock split of Sands’ common stock took place on March 31, year 3. number of shares to be used in the basic earnings per share computation for 2003?
Additional information is presented below. A. 315,000. C. 305,000.
Number of common shares issued and outstanding at 1/1/year 1 1,000,000 B. 307,500. D. 267,500. S, S & T
Shares issued as a result of a 10% stock dividend on 9/30/year 1 100,000
21
Shares issued for cash on 3/31/year 2 1,000,000 . On December 31, 2009, Case, Inc. had 300,000 shares of common stock issued and
Number of common shares issued and outstanding at 12/31/year 2 2,100,000 outstanding. Case issued a 10% stock dividend on July 1, 2010. On October 1, 2010, Case
purchased 24,000 shares of its common stock for treasury, and recorded the purchase by the
15
. The weighted-average number of common shares used in computing earnings per common cost method. What is the number of shares that should be used in computing basic earnings
share for Year 2 on the Year 3 comparative income statement was per share for the year ended December 31, 2010?
A. 1,100,000. C. 1,025,000. A: 306,000 C: 324,000
B. 1,050,000. D. 2,100,000. B: 309,000 D: 330,000 Wiley 2011

16
. The weighted-average number of common shares used in computing earnings per common 25. On December 31, 2013, Overachiever, Inc. had 500,000 shares of common stock issued and
share for Year 3 on the Year 3 comparative income statement was outstanding. Overachiever issued a 10 percent stock dividend on June 1, 2014. On November
A. 1,600,000. C. 2,100,000. 1, 2014, Overachiever reacquired 30,000 shares of its common stock and recorded the
B. 1,850,000. D. 3,700,000. purchase using the cost method of accounting for treasury stock. What number of shares
should be used in computing basic earnings per share for the year ended December 31,
17
. The weighted-average number of common shares to be used on computing earnings per 2014? (M)
common share for Year 3 on the Year 4 comparative income statement is a. 421,667 c. 524,167
A. 1,850,000. C. 3,700,000. b. 470,000 d. 530,000 S&S 18e
B. 2,100,000. D. 4,200,000.
26. On December 31, 2005, Superior, Inc. had 600,000 shares of common stock issued and
18
. The weighted-average number of common shares to be used in computing earnings per outstanding. Superior issued a 10 percent stock dividend on July 1, 2006. On October 1, 2006,
common share for Year 4 on the Year 4 comparative income statement is Superior reacquired 48,000 shares of its common stock and recorded the purchase using the
A. 2,100,000. C. 3,675,000. cost method of accounting for treasury stock. What number of shares should be used in
B. 3,150,000. D. 4,200,000. computing basic earnings per share for the year ended December 31, 2006?
a. 612,000 c. 648,000
Stock Dividend, Repurchase b. 618,000 d. 660,000 S, S & S
19
. On December 31, 2002, Alpha Company had 200,000 shares of common stock issued and
outstanding. Alpha issued a 10% stock dividend on June 30, 2003. On September 30, 2003, Stock repurchase, stock dividend
twenty thousand shares of common stock were reacquired as treasury stock. What is the 18. On January 1, a corporation had 60,000 shares of common stock outstanding. On March 1,
appropriate number of shares to be used in the basic earnings per share computation for the company reacquired 12,000 shares, and it declared a 10% stock dividend on October 1.
2003? The denominator in the earnings per share calculation would be
A. 220,000. C. 202,000. a. 44,200 c. 55,000
B. 194,000. D. 215,000. S, S & T b. 40,800 d. 60,000 NB&J 11e

20
. On December 31, 2002, Beta Company had 300,000 shares of common stock issued and Stock repurchase, issuance, issuance, stock repurchase
outstanding. Beta issued a 5% stock dividend on June 30, 2003. On September 30, 2003, forty 9. On January 1, 2010, Walters Corporation had 24,000 shares of common stock outstanding.
 On April 1, it reacquired 2,400 shares; on July 1, it issued 10,800 shares; on October 1, it preferred shares and 20,000 common shares outstanding throughout the year. Calculate
issued another 9,600 shares; and on December 1, it reacquired 600 shares. The weighted earnings per share.
average number of common shares outstanding for 2010 was A. $0.22 C. $5.25
a. 26,950 c. 29,950 B. $1.15 D. $4.56 Reimers 3e
b. 28,900 d. 41,400 NB&J 11e
4. Use the following information for Equitable, Inc. to answer the following question(s). Equitable
Basic EPS computation – no WANOS computation issued no new common stock and had 100,000 common shares issued and outstanding
Without preferred stock during 2011. Equitable has no preferred stock.
22
. Haverly Company reports net income of $480,000 for 2006 and declared a cash dividend of $1 Net income for the year ended, December 31, 2011 $370,000
per share on each of its 100,000 shares of common stock outstanding. Earnings per share for Retained earnings, December 31, 2010 $280,000
2006 is: Retained earnings, December 31, 2011 $360,000
A. $4.80 per share. C. $0.90 per share. Total shareholders’ equity at December 31, 2011 $725,000
B. $1.00 per share. D. $3.80 per share. Total liabilities at December 31, 2010 $105,000
Total liabilities at December 31, 2011 $385,000
. A company wishing to expand can obtain the necessary funds by borrowing on a long-term Total assets at December 31, 2010 $750,000
note payable or by issuing 100,000 shares of $10 par value common stock. Net income is What was earnings per share for the year ended December 31, 2011?
estimated at $318,000 if the company borrows the funds, and $360,000 if the company issues A. $370,000 C. $3.70
stock. The company currently has 200,000 shares of common stock outstanding. If the B. $0.51 D. $7.50 Reimers 3e
company issues stock, earnings per share would be:
a. $1.59 c. $1.80 16. Use the following information obtained from the company’s computerized accounting
b. $1.06 d. $1.20 information system to answer the question(s) below. Note: There were no preferred shares
outstanding and no additional shares were issued in 2011.
23
. A company wishing to expand can obtain the necessary funds by borrowing on a long-term 2011 2010
note payable or by issuing 50,000 shares of $10 par value ordinary shares. Net income is Net income $ 20,000 $ 16,000
estimated at $302,500 if the company borrows the funds, and $330,000 if the company issues Total assets $ 170,000 $ 150,000
shares. The company currently has 250,000 shares of ordinary shares outstanding. If the Total liabilities $ 94,000 $ 90,000
company issues shares, earnings per share would be: Total shareholders’ equity $ 76,000 $ 60,000
A. $1.00. C. $1.32. Shares outstanding 10,000 shares 10,000 shares
B. $1.10. D. $6.60. Earnings per share for 2011 equals ________.
A. $20,000 C. $2.00 per share
14. Romax Company had net income of $147,000. The balance sheet showed beginning and B. $0.26 per share D. $1.00 per share Reimers 3e
ending balance in shareholders’ equity of $750,000 and $790,000, respectively. There were no
preferred shares and 69,000 common shares outstanding throughout the year. Calculate With preferred dividends
earnings per share. *. Based on the following data: Net income after taxes – P33,000; dividend on Cumulative
A. $0.47 C. $0.19 preferred stock – P6,000; number of shares of common stock outstanding – 4,000. The
B. $2.13 D. $11.16 Reimers 3e earnings per share of a company’s common stock would be (E)
a. P1.50 c. P8.25
13. Team Shirts had net income of $23,000. The balance sheet showed beginning and ending b. P6.75 d. P9.75 RPCPA 1078
balances in shareholders’ equity of $100,000 and $110,000, respectively. There were no
. Safeguard Corporation started and ended the year with 567,200 shares of common stock. Net number of common or preferred shares outstanding during the year. The company declared
income for the year amounted to $2,345,600. Dividends declared amounted to $348,900 of and paid dividends last year of $1.20 per share on the common stock and $1.70 per share on
which $287,700 was distributed to preferred stockholders and of that $200,000 was actually the preferred stock. The earnings per share of common stock is closest to: (M)
paid. Based on this information, earnings per share amounted to approximately a. $3.67. c. $4.23.
A. $3.52 C. $3.78 b. $2.47. d. $3.10. G & N 9e
B. $3.63 D. $4.14
With cumulative preferred shares
. Lennox Company had 300,000 ordinary shares outstanding during the year. Lennox declared 23. Ethelred Corporation reported net income for the current year of $460,000. Ethelred
and paid cash dividends of $200,000 on the ordinary shares and $160,000 on the preference Corporation had 10,000 shares of $100 par value, 10% preferred stock outstanding and
share. If profit for the year was $880,000 what is Lennox’s earnings per share? 50,000 shares of $10 par value common stock outstanding for the entire year. Earnings per
a. $1.73. c. $2.93. share was: (E)
b. $2.27. d. $2.40. a. $6.00 c. $7.20
b. $6.67 d. $8.00
24
. A company has net income for the current year of $120,000 and pays $5,000 in dividends to
25
its preferred shareholders and $20,000 in dividends to its common shareholders. The . Ethelred Corp. reported net income for the current year of $480,000. Ethelred Corp. had 8,500
weighted average number of common shares outstanding for the year is 1,500, and the shares of $100 par value, 15% preference shares outstanding and 50,000 shares of $10 par
weighted average number of preferred shares outstanding for the year is 2,500. Earnings per value ordinary shares outstanding for the entire year. Earnings per share was: (E)
share for this company for the current year, to the nearest cent, is (M) A. $6.67. C. $7.20.
A. $40.00 C. $66.67 B. $7.05. D. $9.60. HHT&S 8e
B. $60.00 D. $76.67 CIA 0594 IV-31
26
. Zazame, Inc., had 4,000 shares of $7 preferred stock $100 par, and 50,000 shares of common
39. Arlberg Company's net income last year was $250,000. The company has 150,000 shares of stock outstanding throughout 2007. In 2007, Zazame declared a dividend of $7 per share on
common stock and 80,000 shares of preferred stock outstanding. There was no change in the its common stock. Compute earnings per share for 2007 if Zazame's income statement
number of common or preferred shares outstanding during the year. The company declared showed net income of $630,000. (M)
and paid dividends last year of $1.30 per share on the common stock and $1.40 per share on A. $7.00 per share. C. $12.04 per share.
the preferred stock. The earnings per share of common stock is closest to: (M) B. $6.00 per share. D. $12.60 per share.
a. $1.67. c. $0.92.
27
b. $2.41. d. $0.37. G & N 9e . Blue Chip Corp. had 40,000 shares of $6 preferred stock, $100 par, and 100,000 shares of $1
par common stock outstanding throughout the year. Net income for the year was $720,000,
40. Arget Company's net income last year was $600,000. The company has 150,000 shares of and Blue Chip declared and distributed a cash dividend of $1 per share on its common stock.
common stock and 60,000 shares of preferred stock outstanding. There was no change in the Earnings per share amounted to: (M)
number of common or preferred shares outstanding during the year. The company declared A. $7.20. C. $4.80
and paid dividends last year of $1.10 per share on the common stock and $0.60 per share on B. $1.00. D. $2.40.
the preferred stock. The earnings per share of common stock is closest to: (M)
a. $4.24. c. $3.76. 5 Horton Corp. had 50,000 shares of 8% preferred stock, $100 par, and 500,000 shares of $1
b. $4.00. d. $2.90. G & N 9e par common stock outstanding throughout the year. Net income for the year was $2,400,000,
and Horton declared and distributed a cash dividend of $4 per share on its common stock.
41. Arquandt Company's net income last year was $550,000. The company has 150,000 shares of Earnings per share amounted to: (M)
common stock and 50,000 shares of preferred stock outstanding. There was no change in the a $4.40. b $2.00.
 c $4.00. d $1.60. b. P4.04 d. P4.67 RPCPA 0597
28 30
. At December 31, 2003, Hansen Corporation had 100,000 shares of common stock and 10,000 . At December 31, 2003 and 2002, Gow Corp. had 100,000 shares of common stock and
shares of 6%, $100 par cumulative preferred stock outstanding. No dividends were declared or 10,000 shares of 5%, $100 par value cumulative preferred stock outstanding. No dividends
paid in 2003. Net income was reported as $400,000. What is basic EPS? were declared on either the preferred or common stock in 2003 or 2002. Net income for 2003
A. $4.00. C. $3.64. was $1,000,000. For 2003, basic earnings per share amounted to
B. $3.40. D. $4.02. S, S & T a. $10.00 c. $ 9.00
b. $ 9.50 d. $ 5.00 Wiley 04-05
29
. Jen Co. had 200,000 shares of common stock and 20,000 shares of 10%, $100 par value
cumulative preferred stock. No dividends on common stock were declared during the year. 28. At December 31, 2006 and 2005, Lapham Corp. had 200,000 shares of common stock and
Net income was $2,000,000. What was Jen’s basic earnings per share? 20,000 shares of 5 percent, $100 par value cumulative preferred stock outstanding. No
A: $ 9.00 C: $10.00 dividends were declared on either the preferred or common stock in 2006 or 2005. Net income
B: $ 9.09 D: $11.11 AICPA R07 for 2006 was $1,000,000. For 2006, basic earnings per common share amounted to
a. $5.00. c. $4.50.
8. The income statement of Tubay Company shows a net loss of P5,000,000 for the year ended b. $4.75. d. $4.00. S, S & S
December 31, 2003. The company has shares outstanding as follows:
Common stock, P100 par, 200,000 shares 20,000,000 78. At December 31, 2001 and 2000, Glass Corp. had 100,000 shares of common stock and
Preferred stock, P100 par, 10% cumulative, 100,000 shares 10,000 shares of 5%, $100 par value cumulative preferred stock outstanding. No dividends
convertible into 100,000 shares of common stock 10,000,000 were declared on either the preferred or common stock in 2001 or 2000. Net income for 2001
The basic loss per share should be was $400,000. For 2001, earnings per common share amounted to
A. 30.00 C. 25.00 a. $4.00. c. $3.00.
B. 20.00 D. 12.50 CPAR 4153 b. $3.50. d. $2.00. K, W & W

3. The stockholders’ equity section of United Textile Corporation appears below as of December Basic EPS computation – with WANOS computation
31, 1997: Issuance
8% cumulative preferred stock, P50 par value, 19. Argonaut Enterprises had 500,000 shares of common stock outstanding on January 1. On
authorized 100,000 shares, outstanding 90,000 June 1, Argonaut issued an additional 60,000 common shares. Argonaut has no treasury
shares P 4,500,000 stock. If Argonaut’s net income was $133,750 for the year, its earnings per share for the year
Common stock, P1 par, authorized and issued was ________, rounded to the nearest cent.
10,000,000 shares 10,000,000 A. $0.27 C. $3.96
Additional paid-in capital 20,500,000 B. $0.24 D. $0.25 Reimers 3e
Retained earnings, December 31, 1996 P132,000,000
Net income 35,000,000 167,000,000 21. Albatross Shipping had 100,000 shares of common stock outstanding on January 1. On
P202,000,000 September 1, Albatross issued an additional 30,000 common shares. Albatross has no
Net income for 1997 reflects a total effective tax rate 35%. Included in the net income figure is treasury stock. If its net income was $12,650 for the year, its earnings per share for the year
a loss of P18,000,000 (before tax) as a result of a major casualty. was ________, rounded to the nearest cent.
How much is the earnings per share that should appear on the financial statements of United A. $0.13 C. $0.11
Textile? B. $0.10 D. $0.12 Reimers 3e
a. P3.46 c. P4.63
31
. A company had 130,000 shares of common stock outstanding on January 1 and then sold 31, 2001, was $510,000. What should be Meyer's 2001 earnings per common share, rounded
30,000 additional shares on March 30. Net income for the year was $495,625. What are to the nearest penny?
earnings per share? a. $1.02 c. $1.20
A. $3.10 C. $3.25 b. $1.27 d. $1.13 K, W & W
B. $4.96 D. $4.58
59. At December 31, 2013, Joplin Company had 350 shares of common stock outstanding. On
32
. Harmony Corporation was organized on January 1 and issued 600,000 shares of common October 1, 2014, an additional 150 shares of common stock were issued. In addition, Joplin
stock on that date. On July 1, an additional 200,000 shares were issued for cash. Net income had $40,000 of 8 percent convertible bonds outstanding at December 31, 2014, which are
for the year was $4,320,000. Net earnings per share amounted to: convertible in 225 shares of common stock. No bonds were converted into common stock in
A. $7.20. C. $5.40. 2014. Net income for the year ended December 31, 2014, was $14,000. Assuming an income
B. $6.35. D. $6.17. tax rate of 50%, the basic earnings per share for the year ended December 31, 2014, would
be (E)
. Safeguard Corporation showed the following account balances on its balance sheet for the a. $27.84 c. $44.32
past two fiscal years: b. $36.08 d. $50.91 S&S 18e
2006 2007
Total Assets $174,250 $234,340 Cash dividend to common, issuance
Total Liabilities 83,100 70,660 15. On January 1, 2010, Smith Company had 21,000 shares of common stock outstanding and
Weighted Average Common Shares 147,945 112,650 issued an additional 4,500 shares on May 1. The company declared and paid a cash dividend
During 2007, Safeguard declared and paid a $34,000 dividend on common stock and of $30,000 and earned $330,000 net income. The earnings per share for the year was
purchased 3,000 shares of its common stock for $36,000. Based on the information provided, a. $15.00 c. $12.94
what would Safeguard’s earnings per share for 2007 be (rounded to the nearest penny)? b. $13.75 d. $12.50 NB&J 11e
A. $0.64 C. $1.09
B. $0.94 D. $1.27 Cash dividend to common & preferred, dividends paid, issuance
12. On January 1, a corporation had 10,380 shares of common stock outstanding. On August 1, it
*. A company has 900,000 common shares outstanding on Jan. 1, issued 600,000 shares on sold an additional 6,000 shares. During the year, dividends of $4,800 and $56,000 were
May 1 and net income applicable to common stock of P2,600,000 for the year ended Dec. 31. declared and paid on the common and preferred stock, respectively. Net income for the year
Earnings per share is (M) was $240,000. The basic earnings per share for the year was
a. P2.00 c. P1.73 a. $10.56 c. $14.29
b. P1.80 d. P1.89 RPCPA 1093 b. $11.23 d. $18.63 NB&J 11e

57. Jett Corp. had 600,000 shares of common stock outstanding on January 1, issued 900,000
shares on July 1, and had income applicable to common stock of $630,000 for the year ending
December 31, 2001. Earnings per share of common stock for 2001 would be
a. $1.05. c. $.60.
b. $.50. d. $.70. K, W & W
58. At December 31, 2001, Meyer Company had 500,000 shares of common stock issued and
outstanding, 400,000 of which had been issued and outstanding throughout the year and
100,000 of which were issued on October 1, 2001. Net income for the year ended December
Preferred dividends, issuance
29. The Thomas Company's net income for the year ended December 31 was $30,000. During the
year, Thomas declared and paid $3,000 in cash dividends on preferred stock and $5,250 in
cash dividends on common stock. At December 31, 36,000 shares of common stock were
outstanding, 30,000 of which had been issued and outstanding throughout the year and 6,000
of which were issued on July 1. There were no other common stock transactions during the
year, and there is no potential dilution of earnings per share. What should be the year's basic
earnings per common share of Thomas, rounded to the nearest penny?
a. $0.66 c. $0.82
 b. $0.75 d. $0.91 S, S & S share?
a. $1.10 c. $0.85
18. Rand, Inc. had 20,000 shares of common stock outstanding at January 1, 19_6. On May 1, b. $0.90 d. $0.65 AICPA 1190, RPCPA 0598
19_6 it issued 10,500 shares of common stock. Outstanding all year were 10,000 shares of
non-convertible preferred stock on which a dividend of P4 per share was paid in December 77. Stark Co. had 300,000 shares of common stock issued and outstanding at December 31,
19_6. Net income for 19_6 was P96,700. Rand’s earnings per share for 19_6 is 2000. No common stock was issued during 2001. On January 1, 2001, Stark issued 200,000
a. P1.86 c. P2.84 shares of nonconvertible preferred stock. During 2001, Stark declared and paid $100,000 cash
b. P2.10 d. P3.58 dividends on the common stock and $80,000 on the preferred stock. Net income for the year
ended December 31, 2001 was $620,000. What should be Stark's 2001 earnings per common
30. Bay Area Supplies had 60,000 shares of common stock outstanding at January 1. On May 1, share?
Bay Areas Supplies issued 31,500 shares of common stock. Outstanding all year were 30,000 a. $2.07 c. $1.73
shares of nonconvertible preferred stock on which a dividend of $4 per share was paid in b. $1.80 d. $1.47 K, W & W
December. Net income for the year was $290,100. Bay Area Supplies should report basic
earnings per share for the year of 27. At December 31, 2005, the Murdock Company had 150,000 shares of common stock issued
a. $1.86. c. $2.84. and outstanding. On April 1, 2006, an additional 30,000 shares of common stock were issued.
b. $2.10. d. $3.17. S, S & S Murdock's net income for the year ended December 31, 2006, was $517,500. During 2006,
Murdock declared and paid $300,000 in cash dividends on its nonconvertible preferred stock.
29. Gold Coast Supplies had 80,000 shares of common stock outstanding at January 1. On May The basic earnings per common share, rounded to the nearest penny, for the year ended
1, Gold Coasts Supplies issued 21,500 shares of common stock. Outstanding all year were December 31, 2006, should be
30,000 shares of nonconvertible preferred stock on which a dividend of $3 per share was paid a. $3.00. c. $1.45.
in December. Net income for the year was $300,000. Gold Coast Supplies should report basic b. $2.00. d. $1.26. S, S & S
earnings per share for the year of (M)
35
a. $2.07 c. $3.18 . On December 31, 2002, the Gemcraft Company had 100,000 shares of common stock issued
b. $2.23 d. $3.26 S&S 18e and outstanding. On March 31, 2003, the company sold 20,000 additional shares for cash.
Gemcraft's net income for the year ended December 31, 2003 was $450,000. During 2003,
33
. At December 31, 2009, the Merlin Company had 50,000 shares of common stock issued and Gemcraft declared and paid $50,000 in cash dividends on its nonconvertible preferred stock.
outstanding. On April 1, 2010, an additional 10,000 shares of common stock were issued. What is the 2003 basic earnings per share?
Merlin’s net income for the year ended December 31, 2010, was $172,500. During 2010 A. $3.75. C. $4.00.
Merlin declared and paid $100,000 cash dividends on its nonconvertible preferred stock. The B. $4.50. D. $3.48. S, S & T
basic earnings per common share, rounded to the nearest penny, for the year ended
36
December 31, 2010, should be . On December 31, 2002, the Frisbee Company had 250,000 shares of common stock issued
A: $1.26 C: $3.00 and outstanding. On March 31, 2003, the company sold 50,000 additional shares for cash.
B: $1.32 D: $3.14 Wiley 2011 Frisbee’s net income for the year ended December 31, 2003 was $700,000. During 2003,
Frisbee declared and paid $80,000 in cash dividends on its nonconvertible preferred stock.
34
. Poe Co. had 300,000 shares of common stock issued and outstanding at December 31, 1988. What is the 2003 basic earnings per share?
No common stock was issued during 1989. On January 1, 1989, Poe issued 200,000 shares A. $2.16. C. $3.10.
of nonconvertible preferred stock. During 1989, Poe declared and paid $75,000 cash B. $3.50. D. $2.80. S, S & T
dividends on the common stock and $60,000 on the preferred stock. Net income for the year
37
ended December 31, 1989 was $330,000. What should be Poe’s 1989 earnings per common . Getaway Travel Company reported net income for 2003 in the amount of $50,000. During
 2003, Getaway declared and paid $2,000 in cash dividends on its nonconvertible preferred 10. On January 1, 2010, Brennen Corporation had 20,000 shares of common shares outstanding.
stock. Getaway also paid $10,000 cash dividends on its common stock. Getaway had 40,000 During the year, it sold another 2,600 shares on July 1 and reacquired 600 shares on
common shares outstanding from January 1 until 10,000 new shares were sold for cash on November 1. The corporation earned $337,600 net income. The company also has 15,000
July 1, 2003. What is the 2003 basic earnings per share? shares of $10 par value, 6%, cumulative preferred stock on which no dividends have been
A. $1.25. C. $ .79. declared for the last two years. The basic earnings per share for the year is
B. $1.07. D. $ .76. S, S & T a. $15.92 c. $15.50
b. $15.65 d. $15.08 NB&J 11e
38
. At December 31, 2002, Mutya Company had 400,000 shares of common stock issued and
outstanding, 250,000 of which had been issued and outstanding throughout the year and Outstanding preferred stock, issued common stock, treasury stock given
39
150,000 of which had been issued on October 1, 2002. Operating income before income tax . The income statement of Crescen Company for the year ended December 31, 2003 showed
for the year ended December 31, 2002 was P7,500,000. In 2002 and 2003, a dividend of net income of P15,000,000. The net income for 2003 reflects an income tax rate of 32%.
P1,000,000 was paid on 100,000 shares of 10% cumulative preferred stock, P100 par. On Included in the net income is an extraordinary loss of P5,000,000 before income tax. The
April 1, 2003, there were 200,000 additional shares issued. Total income before tax for 2003 stockholders’ equity of Crescen Company on December 31, 2003 showed the following
was P8,500,000, which included an extraordinary gain before income tax of P500,000. details:
Assuming a 30% tax rate, what is Mutya’s basic earnings per common share for 2003, Preferred stock, 10% cumulative, P50 par value, 100,000 shares 5,000,000
rounded to the nearest centavo? Common stock, P100 par 30,000,000
A. 9.00 C. 8.25 Additional paid in capital 10,000,000
B. 8.36 D. 7.67 CPAR Retained earnings 18,000,000
Treasury common stock, 50,000 shares, at cost 4,000,000
Preferred dividends, stock dividend Crescen Company should report 2003 basic earnings per share at
37. Crown Corporation’s capital structure at December 31, 1997 was as follows: A. 58.00 C. 73.60
Shares issued and outstanding B. 60.00 D. 48.33 CPAR
Common stock 200,000
Nonconvertible preferred stock 50,000 Net loss, dividends on common & preferred, repurchase
On October 1, 1998, Crown issued a 10% stock dividend on its common stock, and paid 13. On January 1, 2010, a corporation had 10,380 shares of common stock outstanding, and on
P200,000 cash dividends on the preferred stock. Net income for the year ended December June 1, it reacquired 6,000 shares. Despite a net loss for the year of $180,000, the company
31, 1998 was P1,920,000. declared and paid cash dividends of $24,000 and $28,000 on common and preferred stock,
Crown’s 1998 earnings per common share should be respectively. The earnings per share for 2010 was
a. P8.20 c. P9.36 a. ($33.72) c. ($22.10)
b. P8.72 d. P7.82 RPCPA 0598 b. ($30.24) d. ($18.60) NB&J 11e

Preferred dividend, repurchase Net loss, noncumulative preferred shares, repurchase, issuance
14. On January 1, 2010, Libby Corporation had 18,000 shares of common stock outstanding, and 11. On January 1, 2010, Kuper Corporation had 12,000 shares of common stock outstanding.
reacquired 2,000 shares on July 1. The company earned net income of $110,800 and paid a Kuper reacquired 1,000 shares on May 1, and issued another 5,000 shares on September 1.
cash dividend on its preferred stock of $36,000. The earnings per share for the year was The company also has 10,000 shares of $20 par, 10%, noncumulative preferred stock
a. $4.40 c. $3.74 outstanding on which no dividends have been declared during the last two years. The
b. $5.54 d. $4.68 NB&J 11e company had a $45,360 loss for the year. The earnings per share for the year is
a. ($5.03) c. ($3.49)
Preferred dividend, issuance, repurchase b. ($3.78) d. ($1.95) NB&J 11e
Sensitivity anaysis 11. Jazzy Corporation's shareholders' equity section of the balance sheet reports: Ordinary shares
40
. A company wishing to expand can obtain the necessary funds by borrowing on a long-term ($10 par value, 50,000 shares authorized, 15,000 shares issueD. $150,000; Paid-in Capital in
note payable or by issuing 50,000 shares of $10 par value ordinary shares. Net income is Excess of Par Value–Ordinary $50,000; Retained Earnings, $300,000. The book value per
estimated at $302,500 if the company borrows the funds, and $330,000 if the company issues share for ordinary shares is: (E)
shares. The company currently has 250,000 shares of ordinary shares outstanding. If the A. $10.00. C. $20.00.
company issues shares instead of borrowing funds, earnings per share would B. $13.33. D. $33.33. HHT&S 8E
A. decrease by $0.21. C. increase by $0.21.
41
B. decrease by $0.11. D. increase by $0.10. . Trevor Corporation has net assets of $1,971,000 and paid-in capital of $700,000. The only
stock issue consists of 73,000 outstanding shares of common stock. From this information, it
. A company wishing to expand can obtain the necessary funds by borrowing on a long-term can be deduced that the company has: (E)
note payable or by issuing 100,000 shares of $10 par value common stock. Net income is A. Retained earnings of $1,971,000.
estimated at $318,000 if the company borrows the funds, and $360,000 if the company issues B. A deficit of $1,271,000.
stock. The company currently has 200,000 shares of common stock outstanding. If the C. A book value of $11 per share of common stock.
company issues stock, earnings per share would: D. A book value of $27 per share of common stock.
a. increase by $0.39 c. increase by $0.21
b. decrease by $0.39 d. decrease by $0.21 78. The stockholders’ equity section of the balance sheet for Jazzy Corporation is shown below:
Paid-in capital:
Diluted EPS Common stock, $10 par value, 50,000 shares authorized,
Weighted-average number of shares 15,000 shares issued $150,000
Diluted EPS computation Paid-in capital in excess of par value-common 50,000
97. For the current year, Triumph Company reported basic earnings per share of $9 and fully Total paid-in capital $200,000
diluted earnings per share of $4. The difference between these figures is attributable to Retained earnings 300,000
outstanding shares of convertible preferred stock. If all this preferred stock had actually been Total paid-in capital $500,000
converted into common stock at the beginning of the current year, Triumph Company would The book value per share for common stock is: (E)
have reported only one earnings per share amount, which would have been: a. $10.00 c. $20.00
A. $9. C. $4. b. $13.33 d. $33.33
B. $6. D. Cannot be determined.
Book Value per Share – Two Classes of Share Capital
No preferred dividends in arrears
42
. Comet Corp. has total stockholders' equity of $7,400,000. The company's outstanding capital
BOOK VALUE PER SHARE stock includes 100,000 shares of $10 par value common stock and 20,000 shares of 6%, $100
Book value par value preferred stock. (No dividends are in arrears.) The book value per share of common
Book Value per Share – Single Class of Share Capital stock is:
. Barr Pty Ltd reports $4,000,000 of ordinary share capital and $6,000,000 of retained earnings A. $39. C. $54.
on its statement of financial position. The number of ordinary shares issued is 500,000. The B. $49. D. $74.
book value per ordinary share is (E)
a. $12. c. $8.
b. $20. d. None of the above.
43
. Laurel Corporation has total stockholders' equity of $6,600,000. The company has outstanding a. $57.00 c. $63.00
300,000 shares of $2 par value common stock and 20,000 shares of 9% preferred stock, $100 b. $60.50 d. $66.50
par value. (No dividends are in arrears.) The book value per share of common stock is:
A. $14.47. C. $13.52. 80. The book value per share for Minturn Mine common stock is:
B. $14.87. D. $15.33. a. $24.14 c. $26.47
b. $25.50 d. $27.83
44
. Charleston Boat Yard has total stockholders' equity of $3,100,000, comprised of the following:
- $1,000,000 in $4 preferred stock consisting of 10,000 shares of $100 par value. Various Methods in Computing Book Value per Share
- $400,000 in common stock of $5 par value per share. Two Classes of Participating Preferred Shares
- $800,000 of additional paid-in capital. Comprehensive
- $900,000 in retained earnings. Questions 1 thru 5 are based on the following information.
Assuming there are no dividends in arrears, the book value per share of common stock is: Shown below is information relating to the stockholders' equity of Reeve Corporation as of
A. $26.25. C. $16.25. December 31, 2006:
B. $25.00. D. $5.00.

With preferred dividends in arrears

3 Duke Corporation has total stockholders’ equity of $9,680,000 as of December 31, 2007. The
company has 300,000 shares of $2 par value common stock and 20,000 shares of 8%
cumulative preferred stock, $100 par value, outstanding. Due to lower-than-expected net
income, no dividends were declared by Duke’s board of directors for 2007. The book value per
45
share of common stock is: . How many shares of preferred stock are issued and outstanding?
a $25.00. c $23.00. A. 75,000 shares. C. 60,000 shares.
b $25.07. d $25.60. B. 6,000 shares. D. Some other amount.
46
Questions 79 & 80 are based on the following information. . What was the original issue price per share of common stock?
The stockholders’ equity section of the balance sheet for Minturn Mine Corporation is shown below: A. $10.00 per share. C. $15.00 per share.
Paid-in capital: B. $2.40 per share. D. Some other amount.
Preferred stock, 7%, $50 par value, 10,000 shares authorized,
47
7,000 shares issued, redemption value $56 per share $350,000 . Compute total paid-in capital.
Paid-in capital in excess of par value-preferred 50,000 A. $2,292,000. C. $2,400,000.
Common stock, $10 par value, 50,000 shares authorized, B. $1,800,000. D. Some other amount.
18,000 shares issued 180,000
48
Paid-in capital in excess of par value-common 20,000 . Total stockholders' equity is:
Total paid-in capital $600,000 A. $2,400,000. C. $2,340,000.
Retained earnings 300,000 B. $2,460,000. D. Some other amount.
Total paid-in capital $900,000
49
. Book value per share of common stock (rounded to the nearest penny) is:
79. Assume there are 2 years’ dividends in arrears on the preferred stock, including the current A. $30.20 per share. C. $31.80 per share.
year. The book value per share for preferred stock is: B. $28.20 per share. D. $38.20 per share.
Questions 1 thru 5 are based on the following information. Common stock, $5 par, 1,500,000 shares authorized,
Shown below is information relating to the stockholders' equity of Hutton Corporation at December 1,300,000 shares issued and outstanding 6,500,000
31, 2008: Additional paid-in capital: preferred stock 250,000
8% cumulative preferred stock, $100 are, Additional paid-in capital: common stock 3,750,000
10,000 shares authorized, 6,000 shares issued $600,000 Retained earnings 3,260,000
Common stock, $5 par, 500,000 shares authorized,
300,000 shares issued and outstanding 1,500,000 Answer the following questions based on the stockholders’ equity section given above.
Additional paid-in capital: preferred stock 60,000
Additional paid-in capital: common stock 1,600,000 1 The average issue price per share of Lindsay’s preferred stock was:
Retained earnings 790,000 a $117. c $110.
Dividends have been declared and paid for 2008. b $100. d $34.50.
50
. Hutton 's total legal capital at December 31, 2008, is: 2 The total amount of Lindsay’s paid-in capital at December 31, 2007, is:
A. $3,760,000. C. $2,890,000. a $ 8,000,000. c $12,000,000.
B. $3,100,000. D. $2,100,000. b $15,260,000. d $ 4,000,000.
51
. The total amount of Hutton 's paid-in capital at December 31, 2008, is: 3 Lindsay’s total legal capital at December 31, 2007, is:
A. $2,100,000. C. $3,760,000. a $12,000,000. c $11,260,000.
B. $ 790,000. D. $1,660,000. b $15,260,000. d $ 8,000,000.
52
. The average issue price per share of Hutton 's preferred stock was: 4 The book value per share of common stock, assuming current-year preferred dividends have
A. $112. C. $110. been paid, is:
B. $100. D. $66. a $9.23. c $8.66.
b $10.58. d $6.15.
53
. The book value per share of common stock is:
A. $ 7.90. C. $ 9.10. 5 The balance in Retained Earnings at the beginning of the year was $2,710,000, and there
B. $13.17. D. $15.17. were no dividends in arrears. Net income for 2007 was $2,250,000. What was the amount of
dividend declared on each share of common stock during 2007?
54
. The balance in Retained Earnings at the beginning of the year was $650,000, and there were a $1.30. c $1.21.
no dividends in arrears. Net income for 2008 was $890,000. What was the amount of dividend b $2.40. d $3.72.
declared on each share of common stock during 2008?
A. $2.50. C. $2.00.
B. $2.08. D. $2.34.

Questions 1 thru 5 are based on the following information.

Shown below is information relating to the stockholders’ equity of Lindsay Corporation at
December 31, 2007:
8% cumulative preferred stock, $100 par,
50,000 shares authorized, 15,000 shares issued $1,500,000
1
.Answer is (C).
5,000 x 100 = 500,000 par value preference
500,000 x .10 = 50,000 preference dividends
270,000 - 50,000 = 220,000

2
. (55,000 x 3/12) + (65,000 x 9/12) = 62,500

3
.Choice "a" is correct. 140,000 shares of common stock is the weighted average for earnings per share.
The calculation is as follows:
1-1-98: Outstanding all year 120,000
7-1-98: 40,000 issued x 6/12 20,000
Weighted average 140,000
Note: The preferred stock is not considered since it is nonconvertible.
4
.Answer B is correct. The weighted-average shares outstanding is needed for the basic earnings per share
computation. The weighted-average is calculated by multiplying the number of shares issued by the fraction of a year
during which the stock was outstanding. The weighted-average number of shares from the May issuance is [3,000 x
(8/12)], or 2,000 shares. The total number of shares is 47,000 shares (45,000 + 2,000).

5
.Answer (C) is correct. The denominator is the average number of shares outstanding during the year. For the first 4
months there were 20,000 shares outstanding. The number of outstanding shares increased to 24,000 on May 1.
Because of the 20% stock dividend in July, those two numbers were translated to 24,000 and 28,800. An additional
3,000 shares issued in September brought the total for the last 4 months to 31,800 shares. Thus, there were 24,000
shares outstanding during the first 4 months, 28,800 during the middle 4 months, and 31,800 the last 4 months. The
weighted average is 28,200 [(24,000 + 28,800 + 31,800) ÷ 3].
Answer (A) is incorrect because a weighted average should be used, not the year-end figure. Answer (B) is incorrect
because the stock dividend does not apply to the September 1 issuance. Answer (D) is incorrect because the shares
outstanding before July 17 must be translated into post-dividend shares.

6
.(B) [4,000,000 + (100,000 x 6/12) + (100,000 x 3/12)] x 1.10 = 4,482,500

7
.(B) (5,000,000 x 1.10) + (100,000 x 9/12 x 1.10) - (100,000 x 3/12) = 5,557,500

8
.(D) (4,000,000 x 1.10) + (100,000 x 9/12 x 1.10) + (100,000 x 3/12) = 4,507,500

9
.Answer (C) is correct. The weighted-average number of shares outstanding for the year (76,000 shares) is used in the
BEPS calculation.
Dates Shares Fraction Weighted
Outstanding Outstanding of Year Shares
January 1 - April 30 60,000 4 ÷ 12 20,000
May 1 - June 30 96,000 2 ÷ 12 16,000
July 1- September 30 90,000 3 ÷ 12 22,500
October 1 - December 31 70,000 3 ÷ 12 17,500
76,000
Answer (A) is incorrect because 65,000 is the simple average of the shares outstanding on January 1 and December 31.
Answer (B) is incorrect because 70,000 is the year-end number of shares outstanding. Answer (D) is incorrect because
79,000 is the simple average of the shares outstanding at various times during the year.

10
.Answer (B) is correct. BEPS is the amount of earnings per common share. It equals the earnings available to common
shareholders (net profit minus preference dividends, whether or not declared) divided by the weighted-average number
of shares outstanding.
 Answer (A) is incorrect because preference dividends must be subtracted from net profit. Answer (C) is incorrect
because common dividends and interest expense are not subtracted from the numerator. Answer (D) is incorrect
because common dividends and interest expense are not subtracted from the numerator.

11
.Answer (C) is correct. The weighted-average of shares outstanding during the year is used in the EPS denominator.
Shares issued in a stock dividend are assumed to have been outstanding as of the beginning of the earliest accounting
period presented. Thus, the 75,000 shares issued on March 1 are deemed to have been outstanding on January 1. The
EPS denominator equals 235,000 shares {[150,000 x (12 months ÷ 12 months)] + [75,000 x (12 months ÷ 12 months)] +
[60,000 x (2 months ÷ 12 months)]}.
Answer (A) is incorrect because 222,500 is the weighted-average number of shares if the stock dividend is not treated
as retroactive. Answer (B) is incorrect because 225,000 ignores the November 1 issuance. Answer (D) is incorrect
because 285,000 is the year-end number of outstanding shares.

12
.Answer C is correct. The requirement is to compute the weighted-average number of shares outstanding. Answer C is
correct because the weighted-average shares outstanding is calculated as follows:
Shares outstanding at 1/1 100,000 shares × 12/12 100,000
Stock dividend at 3/31 24,000 shares × 12/12 24,000
Stock issued on 6/30 5,000 shares × 6/12 2,500
Total weighted-average common shares outstanding 126,500
NOTE: The stock dividend is treated as if the shares were outstanding for the entire year. The stock issued during the
year is weighted by the number of months outstanding.
13
.(d) The computation of weighted-average shares outstanding is
Date # of shares Fraction WA
1/1 30,000 x 12/12 = 30,000
2/1 3,000 x 12/12 = 3,000
7/1 8,000 x 6/12 = 4,000
37,000
The 3,000 shares issued as a result of a stock dividend are weighted at 12/12 instead of 11/12 because for EPS
purposes stock dividends are treated as if they occurred at the beginning of the year.

14
.Answer D is correct. The computation of weighted-average shares outstanding is
Date # of Fraction WA
1/1 39,000 x 12/12 = 39,000
2/1 3,000 x 12/12 = 3,000
7/1 8,000 x 6/12 = 4,000
46,000
The 3,000 shares issued as a result of a stock dividend are weighted at 12/12 instead of 11/12 because for EPS
purposes stock dividends are treated as if they occurred at the beginning of the year.

15
.Answer (A) is correct. At the beginning of Year 2, 1,000,000 shares were outstanding. Another 100,000 were issued as
a result of a stock dividend on September 30. Because a stock dividend is nothing more than dividing the existing
shares into more pieces, the dividend is assumed to have occurred at the beginning of the year. Accordingly, the
number of shares outstanding throughout Year 2 would have been 1,100,000. No stock dividends or stock splits
occurred in Year 3. Thus, the same 1,100,000 shares used in the EPS calculation on the Year 2 income statement
would still be used to determine the Year 2 EPS in the Year 3 comparative statements.
Answer (B) is incorrect because the weighted average was 1,100,000 shares. Answer (C) is incorrect because the
weighted average was 1,100,000 shares. Answer (D) is incorrect because the weighted average was 1,100,000 shares.

16
.Answer (B) is correct. At the beginning of Year 3, 1,100,000 shares were outstanding. This figure remained unchanged
for 3 months until March 31 when an additional 1,000,000 shares were issued. Hence, for the last 9 months of the year,
2,100,000 shares were outstanding. Weighting the shares outstanding by the amount of time they were outstanding
 results in a weighted average of 1,850,000 shares {[(3/12) x 1,100,000] + [(9/12) x 2,100,000]}.
Answer (A) is incorrect because the appropriate weighted average is 1,850,000 shares. Answer (C) is incorrect because
the appropriate weighted average is 1,850,000 shares. Answer (D) is incorrect because the appropriate weighted
average is 1,850,000 shares.

17
.Answer (C) is correct. A stock dividend or split occurring at any time must be treated as though it occurred at the
beginning of the earliest period presented for purposes of computing the weighted-average number of shares. Thus,
prior period EPS figures presented for comparative purposes must be retroactively restated for the effects of a stock
dividend or a stock split. The number of shares used in computing the Year 3 EPS on the Year 3 income statement was
1,850,000 {[(3/12) X 1,100,000] + [(9/12) X 2,100,000]}. However, because of the stock split on March 31, Year 4, the
number of shares doubled. Thus, the EPS calculation for Year 3 on the Year 4 comparative income statement should be
based on 3,700,000 shares (2 x 1,850,000).
Answer (A) is incorrect because the appropriate weighted average is 3,700,000 shares. Answer (B) is incorrect because
the appropriate weighted average is 3,700,000 shares. Answer (D) is incorrect because the appropriate weighted
average is 3,700,000 shares.

18
.Answer (D) is correct. At the beginning of Year 4, 2,100,000 shares were outstanding. Because of the March 31 two-for-
one stock split, that number increased to 4,200,000. The stock split is assumed to have occurred on the first day of the
year. Consequently, the number of shares outstanding throughout Year 4 was 4,200,000.
Answer (A) is incorrect because the weighted average of shares outstanding equaled 4,200,000. Answer (B) is incorrect
because the weighted average of shares outstanding equaled 4,200,000. Answer (C) is incorrect because the weighted
average of shares outstanding equaled 4,200,000.

19
.(D). (200,000 x 1.10) – (20,000 x 3/12) = 215,000

20
.(C) (300,000 x 1.05) – (40,000 x 3/12) = 305,000

21
.Answer C is correct. The requirement is to determine the number of shares to be used in computing 2010 basic
earnings per share (EPS). For EPS purposes, shares of stock issued as a result of stock dividends or splits should be
considered outstanding for the entire period in which they were issued. Therefore, both the original 300,000 shares and
the additional 30,000 shares (10% × 300,000) are treated as outstanding for the entire year. The 10/1/10 purchase of
24,000 treasury shares results in a weighted-average deduction of 6,000 shares (3/12 × 24,000) because the shares
were not outstanding for only 3 months during 2010. Therefore, the number of shares for EPS computations is 324,000.
Outstanding 12/31/09 300,000
Stock dividend (10% × 300,000) 30,000
10/1 purchase (3/12 × 24,000) (6,000)
324,000

22
.480,000/100,000 = 4.80

23
.Calculations: NI/# shares ordinary shares outstanding
330,000/250000+50000=330000/300000=1.10
24
.Answer (D) is correct. Earnings per share indicates the income earned by each share of common stock. The numerator
equals earnings available to common shareholders (net income - preferred dividends). The denominator is the weighted-
average number of common shares outstanding over the accounting period. Thus, earnings per share for this company
for the current year is $76.67 [($120,000 - $5,000) ÷ 1,500 shares].
Answer (A) is incorrect because $40.00 equals net income minus common dividends, divided by the weighted average
of preferred shares. Answer (B) is incorrect because $60.00 equals net income divided by half of the sum of the
weighted-average of preferred shares and the weighted-average of common. Answer (C) is incorrect because $66.67
subtracts common dividends, instead of preferred dividends, from net income.
25
.Answer is (B). 480,000 - (850,000 x .15)/50,000 = 480,000 -127,500/50,000 = $7.05

26
. ((630,000 – (4,000 x 7)) / 50,000 = 12.04

27
.720,000 – (6 x 40,000) = 480,000/100,000 = 4.80

$400,000 - $60,000 $340,000

  $3.40
28
.(B) 100,000 100,000

29
.Answer A is correct. The requirement is to compute basic earnings per share. The formula for basic earnings per
share is (net income minus preferred dividends) divided by the weighted-average common shares outstanding.
Although no dividends were declared during the year, the preferred dividend must be subtracted because the preferred
stock is cumulative. The preferred dividend of $200,000 (10% × $2,000,000 par) must be subtracted in determining the
numerator for basic earnings per share. Accordingly, answer (a) is correct because basic EPS is ($2,000,000 net
income – $200,000 preferred dividends) ÷ 200,000 weighted-average common shares outstanding = $9.00 per share.

30
.(b) The formula for basic earnings per share (BEPS) is
($1,000,000 --$50,000)/100,000 = $9.50
In calculating the numerator, the claims of preferred shareholders against 2003 earnings should be deducted to arrive at
the 2003 earnings attributable to common shareholders. This amount is 50,000 (5% x $100 x 10,000 shares). The
$50,000 preferred dividends in arrears is not deducted to compute the numerator in determining 2003 BEPS. This is
because the $50,000 dividends in arrears is a claim of preferred shareholders against 2002 earnings and would reduce
2002 BEPS.

31
.(130,000 x 3/12) + (160,000 x 9/12) = 152,500; 495,625/152,500 = 3.25

32
. (600,000 x 6/12) + (800,000 x 6/12) = 700,000; 4,320,000/ 700,000 = 6.17

33
.Answer A is correct. The formula for EPS is
(Net income – Applicable preferred dividends)
EPS = (Weighted-average number of common shares outstanding)
The $172,500 must be reduced by the $100,000 dividend to the preferred stockholders. The 50,000 shares outstanding at
the beginning of the year must be adjusted to reflect the 10,000 shares that were outstanding for 9 months, resulting in a
total weighted-average of 57,500 shares outstanding. The final computation is the $72,500 of adjusted earnings divided by
57,500 shares, resulting in $1.26 of EPS.

34
.REQUIRED: The amount of BEPS.
DISCUSSION: (B) BEPS is equal to the amount of earnings available to the common shareholders divided by the
weighted-average number of shares of common stock outstanding during the year. To calculate earnings available to
holders of common stock, dividends on cumulative preferred stock must be subtracted from net income whether or not
the dividends were declared. Earnings per common share for 2001 thus amounted to $0.90.

Answer (A) is incorrect because $1.10 assumes no preferred dividends were declared. Answer (C) is incorrect because
$0.85 assumes the common but not the preferred dividends were subtracted from the numerator. Answer (D) is
incorrect because $0.65 assumes all dividends are subtracted from the numerator.

35
.(D)
 $450,000 - $50,000 $400,000
  $3.48
100,000 + (20,000 x 9 / 12) 115,000

36
.(A)
$700,000 - $80,000 $620,000
  $2.16
250,000 + (50,000 x 9 / 12) 287 ,500

37
.(B)
$50,000 - $2,000 $48,000
  $1.07
40,000 + (10,000 x 6 / 12) 45,000

38
.A 1/1/03 400,000
4/1/03 (200,000 x 9/12) 150,000
Average 550,000

Net income (8,500,000 x 70%) 5,950,000

Less: Preferred dividend 1,000,000
Net income to CS 4,950,000
Basic EPS (4,950,000 / 550,000) 9.00

39
.A Net income 15,000,000
Preferred dividends (10% x 5,000,000) (500,000)
Net income to common 14,500,000
Divide by common shares outstanding (300,000 – 50,000 treasury) 250,000
Basic ESP 58

40
.Calculations: shares EPS = NI/ Common shares outstanding
Shares EPS = 330,000/250000+50000=330000/300000=1.10
Note payable EPS = NI/ Common shares outstanding
Note payable EPS = 302500/250000=1.21
1.10-1.21= .11 decrease
41
.1,971,000/73,000 = 27

42
.7,400,000 – (20,000 x 100) = 5,400,000; 5,400,000/100,000 = 54

43
.6,600,000 – (20,000 x 100) = 4,600,000; 4,600,000/300,000 = 15.33

44
. (3,100,000 – 1,000,000)/80,000 = 26.25

45
.600,000/100 = 6,000

46
.10 + (600,000/120,000) = 15

47
.600,000 + 1,200,000 + 600,000 = 2,400,000

48
.600,000 + 1,200,000 + 600,000 – 60,000 = 2,340,000

49
.1,200,000 + 600,000 – 60,000 – 48,000 = 1,692,000/60,000 = 28.20
50
.1,500,000 + 600,000 = 2,100,000

51
.600,000 + 1,500,000 + 60,000 + 1,600,000 = 3,760,000

52
.(600,000 + 60,000)/6,000 = $110.

53
.(1,500,000 + 60,000 + 1,600,000 + 790,000)/300,000 = $13.17

54
.650,000 + 890,000 – 790,000 = 750,000
Preferred dividends (6,000 x 8) = 48,000
(750,000 – 48,000)/300,000 = $2.34