1. Diluted earnings per share is a hypothetical computation to warn stockholders what could happen if:
A) Loss contingencies turn out adversely
B) Convertible securities are converted into shares of common stock.
C) Extraordinary losses were to recur
D) Consideration were given to the loss from operations discontinued during the current period.
2. Zanzibar, Inc., had 2,000 shares of $6 preferred stock $100 par, and 30,000 shares of common stock outstanding throughout 2002. In 2002, Zanzibar declared a dividend of $6 per share on its common stock. Compute earnings per share for 2002 if Zanzibar's income statement showed net income of $240,000.
A) $8.00 per share.
B) $6.00 per share.
C) $7.60 per share.
D) $1.60 per share.
3. For the current year, Dewing Company reported basic earnings per share of $8 and fully diluted earnings per share of $3. The difference between these figures is attributable to outstanding shares of convertible preferred stock. If all this preferred stock had actually been converted into common stock at the beginning of the current year, Dewing Company would have reported only one earnings per share amount, which would have been:
A) $8.
B) $5.
C) $3.
D) Cannot be determined.
4.) An example of an extraordinary gain or loss is:
A) A large loss arising from inability to collect an account receivable from a bankrupt customer
B) A large gain from disposal of a segment of the business
C) A gain or loss from sale of an expensive machine no longer needed in the business
D) None of these answers
5.) Which of the following would be treated as a prior period adjustment by Gold Corporation in 2010?
A) In 2010, it was discovered that Gold Corporation recorded the purchase of a warehouse in 2007 as a debit to Repairs
B) In 2010, Gold Corporation switched from the straight-line method of depreciation to another method of computing depreciation.
C) In 2010, Gold Corporation's management decided that the estimated useful life of its computer equipment should be changed from five years to nine years.
D) In 2010, Gold Corporation sold a segment of the business that it has operated since 1996
6. To receive the next cash dividend, an investor must purchase the stock before the:
A. Dividend declaration date.
B. Ex-dividend date.
C. Date of record.
D. Payment date announced by the board of directors.
7. The amount of earnings per share is usually computed:
A. For both preferred and common stock.
B. For common stock by deducting the dividends on preferred stock from net income and dividing the remaining amount by the weighted average number of common shares outstanding.
C. By dividing net income by the combined number of preferred and common shares.
D. On the basis of the number of shares outstanding at year-end, regardless of changes in the number of shares during the year.