Acct 302 EPS

In applying the treasury stock method to determine the dilutive effect of stock options and warrants, the proceeds assumed to be received upon exercise of the options and warrants

are used to calculate the number of common shares repurchased at the average market price, when computing diluted earnings per share.

When computing diluted earnings per share, convertible bonds are:

assumed converted only if they are dilutive.

In the diluted earnings per share computation, the treasury stock method is used for options and warrants to reflect assumed reacquisition of common stock at the average market price during the period. If the exercise price of the options or warrants exceeds the average market price, the computation would

be antidilutive.

In computations of weighted average of shares outstanding, when a stock dividend or stock split occurs, the additional shares are

considered outstanding at the beginning of the earliest year reported.

In computing earnings per share for a simple capital structure, if the preferred stock is cumulative, the amount that should be deducted as an adjustment to the numerator (earnings) is the

none of these answer choices is correct.

Antidilutive securities

should be ignored in all earnings per share calculations.

Which of the following is the formula for computing EPS?

(Net income - Preferred dividends) ÷ Weighted average number of shares outstanding

Which earnings per share amounts are reported in a complex capital structure?

Basic and diluted EPS.

What effect will the acquisition of treasury stock have on stockholders' equity and earnings per share, respectively?

Decrease and increase

A convertible bond issue should be included in the diluted earnings per share computation as if the bonds had been converted into common stock, if the effect of its inclusion is:

Dilutive - Yes Antidilutive - No

Of what will the numerator of the diluted EPS calculation consist when convertible preferred stock is being included?

Net income.

If preferred stock is cumulative, and dividends have not been declared in the past two years or in the current year, what amount should be deducted from net income in the EPS calculation?

Only the current year's dividend.

With respect to the computation of earnings per share, which of the following would be most indicative of a simple capital structure?

Ownership interest consisting solely of common stock.

The diluted EPS computation considers all of the following except the impact of:

antidilutive securities.

In determining diluted earnings per share, dividends on nonconvertible cumulative preferred stock should be

deducted from net income whether declared or not.

Assume there are two dilutive convertible securities. The one that should be used first to recalculate earnings per share is the security with the

smaller earnings per share adjustment.

The treasury stock method of computing incremental shares applies to:

stock options and warrants.