Hi, Ma'am/Sir! Can someone help me to answer this True or False questions? I need an explanation on every question. Thank you! :>
PROBLEMS PROBLEM 1: TRUE OR FALSE 1. When the market price of stock options, warrants, and rights is higher than the current option price, exercise might occur, therefore, there is potential dilution from these securities and they would be included in the computation of diluted earnings per share. 2. In order to compute diluted earnings per share when convertible debt exists, adjustments must be made both to net income (numerator) and to the number of shares of common stock outstanding (denominator). 3. When a company has only common stock outstanding, but there are convertible securities, stock options, warrants, or other rights outstanding, it is never classified as a company with a simple capital structure. 4. The term "complex capital structure" describes a company with outstanding stock options, warrants, convertible securities, etc., which are materially dilutive. 5. When earnings per share are diluted as a result of the inclusion of outstanding options and warrants, the market price of the common stock at the end of the period is used in computing the number of shares assumed to be reacquired. 6. Nonconvertible preferred stock is excluded from consideration in the determination of basic earnings per share during periods where dividends on preferred stock are declared. 7. Retroactive treatment of common stock dividends and splits is required for all periods' earnings per share data presented in the financial statements. 8. If preferred stock dividends are cumulative, the full amount of the annual dividends should be deducted from net income in the determination of basic earnings per share, whether or not the dividends have been declared.9. Any security whose exercise or conversion would increase earnings per share or reduce loss per share are referred to as antidilutive securities. 10. When a convertible bond is included in the determination of diluted earnings per share, net income is adjusted by adding back the interest expense, and the number of shares of common stock outstanding is increased by the number of shares that would have been issued upon conversion