[1] The following data are extracted from the equity section of the balance sheet of Ebbs Corporation: 12/31/01 12/31/02 -------- -------- Common stock ($2 par value) $100,000 $102,000 Paid-in capital in excess of par 50,000 58,000 Retained earnings 100,000 104,600 During 2002, the corporation declared and paid cash dividends of $15,000 and also declared and issued a stock dividend. There were no other changes in stock issued and outstanding during 2002. Net income for 2002 was

A. $4,600 B. $19,600 C. $21,600 D. $29,600

[2] Unlike a stock split, a stock dividend requires a formal journal entry in the financial accounting records because stock A. Dividends increase the relative book value of an individual's stock holding. B. Splits increase the relative book value of an individual's stock holdings. C. Dividends are payable on the date they are declared. D. Dividends represent a transfer from retained earnings to capital stock.

[3] Effective April 27, 2002, the shareholders of Wuerffel Corp. approved a 2-for-1 split of the company's common stock and an increase in authorized common shares from 100,000 shares (par value $20 per share) to 200,000 shares (par value $10 per share). No state legal requirements apply to this stock split. Wuerffel's equity accounts immediately before issuance of the shares were as follows: Common stock, par value $20; 100,000 shares authorized; 50,000 shares outstanding $1,000,000 Additional paid-in capital ($3 per share on issuance of common stock) 150,000 Retained earnings 1,350,000 The shares were issued on June 30, 2002. In Wuerffel's June 30, 2002 statement of equity, the balances of additional paid-in capital and retained earnings are

Additional Retained Paid-in Capital Earnings --------------- ----------

A. $0 $500,000 B. $150,000 $350,000 C. $150,000 $1,350,000 D. $1,150,000 $350,000

[4] Snell Co. had 300,000 shares of common stock issued and outstanding at December 31, 2001. No common stock was issued during 2002. On January 1, 2002, Snell issued 200,000 shares of nonconvertible preferred stock. During 2002, Snell declared and paid $75,000 of cash dividends on the common stock and $60,000 on the preferred stock. Net income for the year ended December 31, 2002 was $330,000. What should be Snell's 2002 basic earnings per share?

A. $1.10 B. $0.90 C. $0.85 D. $0.65

[5] Starks Corporation has 300,000 shares of common stock outstanding. The only other securities outstanding are 10,000 shares of 9% cumulative preferred stock with detachable warrants (10 warrants per preferred share). Each warrant provides for the purchase of one share of common stock at $72. For 2002, net income was $1.6 million. During 2002, the average market price of common stock was $125. The price at December 31, 2002 was $120. What number of shares should be used to determine 2002 diluted earnings per share

A. 340,000 B. 342,400 C. 357,600 D. 400,000

[6] During all of 2002, Berlin Co. had outstanding 100,000 shares of common stock and 5,000 shares of noncumulative, $7 preferred stock. Each share of the latter is convertible into three shares of common. For 2002, Berlin had $230,000 income from continuing operations and $575,000 of extraordinary losses; no dividends were paid or declared. Berlin should report 2002 diluted earnings (loss) per share for income from continuing operations and for net income (loss), respectively, of

A. $2.30 and $(3.45). B. $2.00 and $(3.00). C. $2.19 and $(3.29). D. $2.26 and $(3.39).

[7] At the beginning of the fiscal year, June 1, 2001, Piotrowski Corporation had 80,000 shares of common stock outstanding. Also outstanding was $200,000 of 8% convertible bonds that had been issued at $1,000 par. The bonds were convertible into 20,000 shares of common stock; however, no bonds were converted during the year. The company's tax rate is 34%. Piotrowski's net income for the year was $107,000. Diluted earnings per share (rounded to the nearest cent) of Piotrowski common stock for the fiscal year ended May 31, 2002 was

A. $1.07 B. $1.18 C. $1.23 D. $1.34