Dr. Pepper Inc. has gathered the following information to be used in developing its Earnings Per Share presentation for its annual financial statements dated December 31, YR11. Net Income for the year is $2,000 and the income tax rate is 20%. Other relevant information for the year includes: Common $1 par value common stock; 4,000 shares authorized; 1,200 shares issued and 800 shares Stock: outstanding at 12-31-YRII. The company began the year with 500 shares issued and outstanding. On 2-1-YR11 an additional 100 shares were issued for cash. Also, on 8-1-YRII, the company purchased 200 shares to be held as treasury stock. Finally, on 11-1-11 the company declared a 2 for 1 stock split effective 12-1-11. Convertible $3,000 of 8% convertible bonds are outstanding at 12-31-YRII. The 10 year bonds are dated 7-1-YRII, Bonds: were issued at 102 on 9-1-YRII, and pay interest each year on July 1. Beginning on 12-1-YR12 each $1,000 bond is convertible into common stock according to the following schedule. Year of conversion Conversion rate YR12 to YR14 15 shares for each bond YR15 and beyond 25 shares for each bond As of 12-31-YRII none of these bonds have been converted to common stock. Also, for the year ended 12-31-YRI1 the company recorded $10 of bond premium amortization (straight-line method) related to these bonds. Options: A total of 50 (Series A) stock options with an exercise price of $4 were outstanding at 12-31-YRII. Upon payment of $4, each option is convertible into one share of common stock. The options were originally issued on 1-1-YR10 and are exercisable between 9-30-YR12 and 12-31-YR18. Note: As of 12-31-YR11 none of these options have been converted to common stock. Preferred $100 par value, 3% cumulative preferred stock; 1,000 shares authorized; 300 shares issued and 200 shares Stock: outstanding at 12-31-YRII. This issue of preferred stock is not convertible into common stock. This preferred stock was issued during the year ended 12-31-YR07. Dividends were last declared and paid for the year ended 12-31-YR09. Dividends for both YR10 and YR11 have not been declared or paid. On 6-1-YR10 the company purchased 100 shares to be held as treasury stock. Market Prices During YR11 the common stock price averaged $5, and ended at $8 per share on 12-31-YRII. of Securities: Also, during YR11 the market price of the options averaged $2, and ended at $2 per option on 12-31-YRIT. 14. For the year ended December 31, YRI1 the weighted average common shares outstanding was (round to nearest whole share): b. 541 c. 542 e. None of the above a. 508 d. 575 15. What amount of preferred dividends will be used in computing the numerator of Simple EPS? a. $600 b. $900 c. $1,200 d. $1,800 e. None of the above 16. Simple EPS for the year ended 12-31-YRII is (round to nearest penny): a. $1.00 b. $1.38 c. $1.75 d. $1.97 e. None of the above 17. In the preliminary calculation of Diluted EPS what is the dollar amount of the adjustment to 'Income Available for Common (numerator effect) for the convertible bonds? (Do not consider whether the bonds are dilutive, round to nearest dollar.) a. $40 b. $56 c. $72 d. $90 e. None of the above 18. In the preliminary calculation of Diluted EPS what number of additional common shares is used to adjust Weighted Average Common Shares Outstanding' (denominator effect) for the convertible bonds? (Do not consider whether the bonds are dilutive, round to nearest whole share.) a. ll cs b. 15 cs c. 19 cs d. 25 cs e. None of the above 19. In the preliminary calculation of Diluted EPS what number of additional common shares is used to adjust 'Weighted Average Common Shares Outstanding' (denominator effect) for the Series A Stock Options? (Do not consider whether the options are dilutive, round to nearest whole share.) a. 0cs b. 5 cs c. 10 cs d. 20 es e. None of the above 20. For this question you are asked to determine what amount the company would report for Diluted EPS for the year ended 12-31-YR11. To avoid the effect of carryforward errors (if any) in your prior answers use the following values in computing Diluted EPS. Description Net Income (Loss) Weighted Average Common Shares Outstanding (question 14) Preferred Dividends (question 15) Bond Numerator Effect (question 17) Bond Denominator Effect (question 18) Option Denominator Effect (question 19) Assumed Correct Value For Purposes of Answering Question 20 $2,500 500 cs $500 $86 20 cs 50 cs Given these figures, the company would report Diluted EPS of (round to nearest penny): a. $3.64 b. $3.66 c. $4.00 d. $4.01 e. None of the above. Dr. Pepper Inc. has gathered the following information to be used in developing its Earnings Per Share presentation for its annual financial statements dated December 31, YR11. Net Income for the year is $2,000 and the income tax rate is 20%. Other relevant information for the year includes: Common $1 par value common stock; 4,000 shares authorized; 1,200 shares issued and 800 shares Stock: outstanding at 12-31-YRII. The company began the year with 500 shares issued and outstanding. On 2-1-YR11 an additional 100 shares were issued for cash. Also, on 8-1-YRII, the company purchased 200 shares to be held as treasury stock. Finally, on 11-1-11 the company declared a 2 for 1 stock split effective 12-1-11. Convertible $3,000 of 8% convertible bonds are outstanding at 12-31-YRII. The 10 year bonds are dated 7-1-YRII, Bonds: were issued at 102 on 9-1-YRII, and pay interest each year on July 1. Beginning on 12-1-YR12 each $1,000 bond is convertible into common stock according to the following schedule. Year of conversion Conversion rate YR12 to YR14 15 shares for each bond YR15 and beyond 25 shares for each bond As of 12-31-YRII none of these bonds have been converted to common stock. Also, for the year ended 12-31-YRI1 the company recorded $10 of bond premium amortization (straight-line method) related to these bonds. Options: A total of 50 (Series A) stock options with an exercise price of $4 were outstanding at 12-31-YRII. Upon payment of $4, each option is convertible into one share of common stock. The options were originally issued on 1-1-YR10 and are exercisable between 9-30-YR12 and 12-31-YR18. Note: As of 12-31-YR11 none of these options have been converted to common stock. Preferred $100 par value, 3% cumulative preferred stock; 1,000 shares authorized; 300 shares issued and 200 shares Stock: outstanding at 12-31-YRII. This issue of preferred stock is not convertible into common stock. This preferred stock was issued during the year ended 12-31-YR07. Dividends were last declared and paid for the year ended 12-31-YR09. Dividends for both YR10 and YR11 have not been declared or paid. On 6-1-YR10 the company purchased 100 shares to be held as treasury stock. Market Prices During YR11 the common stock price averaged $5, and ended at $8 per share on 12-31-YRII. of Securities: Also, during YR11 the market price of the options averaged $2, and ended at $2 per option on 12-31-YRIT. 14. For the year ended December 31, YRI1 the weighted average common shares outstanding was (round to nearest whole share): b. 541 c. 542 e. None of the above a. 508 d. 575 15. What amount of preferred dividends will be used in computing the numerator of Simple EPS? a. $600 b. $900 c. $1,200 d. $1,800 e. None of the above 16. Simple EPS for the year ended 12-31-YRII is (round to nearest penny): a. $1.00 b. $1.38 c. $1.75 d. $1.97 e. None of the above 17. In the preliminary calculation of Diluted EPS what is the dollar amount of the adjustment to 'Income Available for Common (numerator effect) for the convertible bonds? (Do not consider whether the bonds are dilutive, round to nearest dollar.) a. $40 b. $56 c. $72 d. $90 e. None of the above 18. In the preliminary calculation of Diluted EPS what number of additional common shares is used to adjust Weighted Average Common Shares Outstanding' (denominator effect) for the convertible bonds? (Do not consider whether the bonds are dilutive, round to nearest whole share.) a. ll cs b. 15 cs c. 19 cs d. 25 cs e. None of the above 19. In the preliminary calculation of Diluted EPS what number of additional common shares is used to adjust 'Weighted Average Common Shares Outstanding' (denominator effect) for the Series A Stock Options? (Do not consider whether the options are dilutive, round to nearest whole share.) a. 0cs b. 5 cs c. 10 cs d. 20 es e. None of the above 20. For this question you are asked to determine what amount the company would report for Diluted EPS for the year ended 12-31-YR11. To avoid the effect of carryforward errors (if any) in your prior answers use the following values in computing Diluted EPS. Description Net Income (Loss) Weighted Average Common Shares Outstanding (question 14) Preferred Dividends (question 15) Bond Numerator Effect (question 17) Bond Denominator Effect (question 18) Option Denominator Effect (question 19) Assumed Correct Value For Purposes of Answering Question 20 $2,500 500 cs $500 $86 20 cs 50 cs Given these figures, the company would report Diluted EPS of (round to nearest penny): a. $3.64 b. $3.66 c. $4.00 d. $4.01 e. None of the above