ch 16

What effect will the acquisition of treasury stock have on stockholders' equity and earnings per share, respectively? a. Decrease and increase b. Increase and no effect c. Increase and decrease d. Decrease and no effect

a. Decrease and increase

Antidilutive securities are securities that upon conversion or exercise increase earnings per share. a. True b. False

a. True

When a company has cumulative preferred stock outstanding, the preferred dividend is subtracted from net income in the earnings per share calculation only if it has been declared and paid. a. True b. False

b.

Which of the following is the formula for computing EPS? a. (Net income - Preferred dividends) ÷ Average number of shares outstanding b. (Net income - Preferred dividends) ÷ Weighted average number of shares outstanding c. (Net income + Preferred dividends) ÷ Weighted average number of shares outstanding d. Net income ÷ Number of shares outstanding

b.

Compensation expense resulting from a compensatory stock option plan is generally a. recognized in the period of the grant. b. allocated to the periods benefited by the employee's required service. c. allocated over the periods of the employee's service life to retirement. d. recognized in the period of exercise.

b. allocated to the periods benefited by the employee's required service.

In computations of weighted average of shares outstanding, when a stock dividend or stock split occurs, the additional shares are a. weighted by the number of days outstanding. b. considered outstanding at the beginning of the earliest year reported. c. weighted by the number of months outstanding. d. considered outstanding at the beginning of the year.

b. considered outstanding at the beginning of the earliest year reported

Which earnings per share amounts are reported in a complex capital structure? a. Diluted EPS only. b. Basic and simple EPS. c. Basic EPS only. d. Basic and diluted EPS.

d. basic and diluted EPS.

The date on which to measure the compensation element in a stock option granted to a corporate employee ordinarily is the date on which the employee a. may first exercise the option. b. exercises the option. c. has performed all conditions precedent to exercising the option. d. is granted the option.

d. is granted the option.

Which of the following is an advantage of a restricted-stock plan? a. It creates new job opportunities in a company. b. It increases the market price of the stock. c. It increases the profit of a company. d. It never becomes completely worthless.

d. it never becomes completely worthless