Current GAAP specifies that the compensation costs for stock options are measured at the:

Question 30 options:

grant date only.

grant date and again at the vesting date.

vesting date only.

grant date and again at the exercise date.

Shareholders who sell back shares of the company stock as treasury stock are:

Question 31 options:

not taxed.

taxed at ordinary rates.

taxed at capital gains rates.

subject to tax penalties.

Which of the following statements is correct when a company has a complex capital structure?

Question 32 options:

Diluted earnings per share must be shown on the income statement.

Diluted earnings per share and basic earnings per share must both be
shown on the income statement.

The company might have convertible bonds outstanding.

The company must have participating preferred stock outstanding.

The denominator used in the calculation of basic earnings per share is

the:

Question 33 options:

number of common shares outstanding at the end of the year.

number of preferred shares outstanding at the end of the year.

weighted average number of common shares outstanding during the year.

weighted average number of common shares and preferred shares
outstanding during the year.

Which of the following statements is correct if treasury stock costing $25,000 was sold for $27,500?

Question 34 options:

Total owners' equity increases $2,500.

Total owners' equity increases $27,500.

Net income increases $2,500.

Total owners' equity increases $25,000.

Which of the following statements does NOT accurately reflect the financial accounting for compensatory stock option plans?

Question 35 options:

Compensation expensed is allocated equally over the service (vesting) period.

The compensation expense is not adjusted for changes in the market value of the stock options during the service (vesting) period.

The paid-in capital stock options account is credited when compensation expense is recorded each year.

Total owners' equity is increased by the par value of the common stock issued when the options are converted.

The Heath Corporation reported net income for 2015 of $177,500. Heath began the year with 100,000 shares of $5 parvalue common shares outstanding and 2,500 shares of $100 par value 8% preferred shares outstanding. On October 1, Heath sold 10,000 shares of common stock for $6 per share. Heath paid dividends to the common shareholders in December.

The weighted average number of common shares used to compute earnings per share for 2015 is:

Question 36 options:

100,000.

102,500.

105,000.

110,000.

The Heath Corporation reported net income for 2015 of $177,500. Heath began the year with 100,000 shares of $5 parvalue common shares outstanding and 2,500 shares of $100 par value 8% preferred shares outstanding. On October 1, Heath sold 10,000 shares of common stock for $6 per share. Heath paid dividends to the common shareholders in December.

If each share of preferred stock is convertible into 8 shares of common stock, the diluted earnings for 2015 is (rounded):

Question 37 options:

$1.29 per share.

$1.45 per share.

$1.54 per share.

$1.73 per share.

The following information has been obtained from the Massena Corporation:

• 100,000 shares of common stock were outstanding on January 1, 2015.
• 30,000 shares of common stock were issued on March 1, 2015.
• A 2 for 1 stock split was declared on April 1, 2015.
• The 2 for 1 stock split was distributed on May 1, 2015.
• 10,000 shares of common stock were purchased on October 1, 2015.

What is the weighted average number of shares to be used in the calculation of basic earnings per share for 2015?

Question 38 options:

247,500

216,250

230,833

209,167

Cheery Company follows IFRS for its financial reporting. On January 1, 2015 Cheery issued 250 million of 10-year convertible notes that pay interest at 5% annually. Investors pay 250 million for the notes even though the company's credit risk at the time implies a 10% interest rate for traditional debt of similar duration. When the cash flows associatedwith the debt are discounted at 10%, the resulting value is 175 million.

When Cheery records interest expense on December 31, 2015 the entry will include a:

Question 39 options:

debit to interest expense for 25 million.

credit to Convertible notes payable for 12.5 million.

debit to Convertible notes payable for 17.5 million.

credit to Convertible notes payable for 5 million

The following information has been provided to you by the Smith Corporation for the year ending December 31, 2015:

• The numerator used in the calculation of basic earnings per share was $797,000.
• Cash dividends were paid to the common shareholders.
• 8% convertible bonds with a par value of $1,000,000 were issued on July 1, 2015.
• The corporation's marginal income tax rate is 40%.
• 6% convertible preferred stock with a par value of $800,000 were outstanding during the entire year.

Assuming that both the bonds and preferred stock are dilutive, what is the numerator that should be used in the calculation of diluted earnings per share?

Question 40 options:

$893,000

$869,000

$773,000

$821,000