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Quiz Part1and2 Answers and Solutions Final Wexam Qq2sca Pipino Lows Ieos Practice Quiz 123 Equity Prac 1 A Compress
Quiz Part1and2 Answers and Solutions Final Wexam Qq2sca Pipino Lows Ieos Practice Quiz 123 Equity Prac 1 A Compress
Quiz Part1and2 Answers and Solutions Final Wexam Qq2sca Pipino Lows Ieos Practice Quiz 123 Equity Prac 1 A Compress
CHAPTER 30
1. (AICPA ADAPTED)
Cox Company had 1,200,000 ordinary shares outstanding on January 1 and December
31, 2015. In connection with the acquisition of a subsidiary in June 2014, the entity is
required to issue 50,000 additional ordinary shares on July 1, 2016 to the former owners
of the subsidiary. The entity paid P200,000 annual preference dividend in 2015 and
reported net income of P3,400,000 for the year. The preference share capital is
noncumulative and nonconvertible?
a. 2.83
b. 2.72
c. 2.67
d. 2.56
Solution: Answer D
Dunn Company had 200,000 ordinary shares of P20 par value and 20,000 shares of
P100 par, 6% cumulative, convertible preference share capital outstanding for the entire
year ended December 31, 2015. Each preference share is convertible into 5 ordinary
shares. The net income for the current year was P840, 000.
a. 2.40
b. 2.80
c. 3.60
d. 4.20
Solution: Answer B
3. (IAA)
a. 12.50
b. 12.19
c. 16.25
d. 19.50
Solution: 3 Answer A
4. (AICPA Adapted)
On January 1, 2015, Lex Company had 600,000 ordinary shares outstanding. On April
1, 2015, an additional 180,000 ordinary shares were issued for cash. The entity also
had P5,000,000 of 8% convertible bonds outstanding during 2015, which are convertible
into 150,000 ordinary shares. The bonds are diluted in the 2015 earnings per share
computation. No bonds were issued or converted into ordinary shares during 2015.
What is the number of shares that should be used in computing diluted earnings per
share?
a. 735,000
b. 780,000
c. 885,000
d. 930,000
Solution: Answer C
5. (AICPA Adapted)
2014 2015
During 2015, Petrock paid dividends of P1.00 per ordinary share and P2.40 per
preference share. The preference share capital is convertible into 20,000 ordinary
shares. The net income for 2015 was P285, 000. The income tax rate was 30%.
What amount should be reported as diluted earnings per share for 2015?
a. 2.53
b. 2.61
c. 2.90
d. 2.59
Solution: Answer D
6. (IAA)
a. 2.85
b. 3.25
c. 2.35
d. 2.25
a. 2.85
b. 3.02
c. 2.83
d. 1.75
Solution: #1 Answer A
The effect of the convertible preference shares is increase in EPS and therefore
untidilutive.
Thus, the diluted EPS should the same as basic EPS of P2.85
7. (AICPA Adapted)
On June 30, 2014, Lomond C ompany issued 20, P10,000, 7% bonds at face value.
Each bond was convertible into 200 ordinary shares. On January 1, 2015, 10,000
ordinary shares were outstanding. The bondholders converted all the bonds on July 1,
2015. The net income for the current year was P35,000. The tax rate is 30%.
a. 2.50
b. 2.85
c. 2.92
d. 3.00
Solution: Answer B
8. (IAA)
a. 10.00
b. 9.60
c. 9.12
d. 8.00
Solution: Answer C
1. What is the number of shares that should be used in computing basic earnings per
share?
a. 3,000,000
b. 2,875,000
c. 2,925,000
d. 3,200,000
2. What is the number of shares that should be used in computing diluted earnings per
share?
a. 2,500,000
b. 3,050,000
c. 2,625,000
d. 3,250,000
Solution: #1 Answer A
Solution: #2 Answers B
January 1 2,500,000
April 1 375,000
July 1 125,000
October 1 50,000
10. (IAA)
Fortuner Company had 200,000 ordinary shares outstanding on January 1, 2015, the
entity had issued 4,000 convertible 10% bonds with P1, 000 face value. The bonds
were converted on October 1, 2015 and 40 ordinary shares were issued in exchanged
for each bond. Net income was P5, 000,000. the income tax rate is 30%.
a. 25.00
b. 13.80
c. 20.83
d. 15.62
a. 14.47
b. 21.65
c. 14.72
d. 14.61
Solution: #1 Answer C
11. (IAA)
Dec. 1 Net income for 2015 was P9, 500,000. The tax rate is 30%
a. 11.45
b. 11.88
c. 10.33
d. 10.80
a. 8.30
b. 8.44
c. 8.33
d. 8.48
Solution: #1 Answer A
Solution: #2 Answers A
At the beginning of the current year, Bergen Company issued 4,000,000 convertible
bonds at face value of P10 or a total of P40,000,000. The bonds mature in 3 years and
can be converted into two ordinary shares for each bond.
The entity can settle the principal amount of the bonds in ordinary shares or in cash but
the entity is likely to settle the contract by issuing shares.
When the bonds are issued, the interest rate for a similar debt without conversion rights
is 10% and the market value of share is P4.
The profit attributable to ordinary shareholders for the current year is P33, 000,000 and
there are 10,000,000 ordinary shares outstanding during the current year. The income
tax rate is 30%.
The proceeds from the issuance of the bonds are allocated as follows:
a. 2.00
b. 1.95
c. 3.30
d. 3.51
Solution: Answer B
(4,000,000 x 2) 8,000,000
Total ordinary shares 18,000,000
13.
Accenture Company had made a net profit attributable to ordinary shareholders of P2,
000,000 for the year ended December 31, 2015. There are 100,000 ordinary shares
outstanding during the entire year. Since January 1, 2015, there has been P800,000 of
5% convertible loan in issue.
The terms of conversion are for every P10,000 nominal amount as follows:
No conversion is taken place during the current year. The interest on the convertible
loan is allowable for a tax relief of 30%.
What amount should be reported as diluted earnings per share for the year ended
December 31, 2015?
a. 18.11
b. 17.86
c. 18.21
d. 18.24
Solution: Answer A
Riselle Company is calculating earnings per share for inclusion in the annual report to
shareholders. Riselle Company has obtained the following information from the
controller’s office:
In addition, Riselle has issued 10,000 incentive share options with an exercise price of
P30 to its employees and a year-end market price of p25 per share. What is the amount
of diluted earnings per share?
a. 4.63
b. 4.85
c. 6.94
d. 7.69
Solution: Answer D
15. (IFRS)
Mount Banahaw Company had outstanding 20,000 written put options on its ordinary
shares with an exercise price of P350. The average market price of ordinary shares for
the period is P280.
In calculating diluted earnings per share, how many potential ordinary shares should be
included as a result of the written put option?
a. 20,000
b. 25,000
c. 5,000
d. 0
It is assumed that sufficient number of ordinary shares shall be issue at the average
market price to cover the amount of P 7,000,000.