Please see the attachment and answer the questions. SHOW WORK

SHOW WORK 1. On January 1, 2016, BMO had 474,000 common shares issued and outstanding. During 2016, the following stockholder equity transactions occurred: On April 1, employees exercised 12,000 options to acquire 12,000 shares of common stock. On June 1, investors acquired 18,000 common shares with warrants that were detached from bonds sold in January, 2016. On November, 1, 30,000 common shares were exchanged for a land site that will be used for the firm's future headquarters. At December 31, 2016, how many shares of common stock are outstanding, and, for basic earnings per share computations for 2016, what is the weighted average of common shares outstanding? Shares outstanding 504,000 534,000 534,000 504,000 A. B. C. D. Weighted average shares 489,500 498,500 495,800 498,500 2. Which of the following statements is correct? A. B. C. D. Basic earnings per share is based on actual events and a few pro forma events. Diluted earnings per share is based solely on pro forma events. A and B. Neither A nor B. 3. In the computation of diluted earnings per share, employee stock options are A. B. C. D. Dilutive if they are in the money. Antidilutive if they are out of the money. A and B. Neither A nor B. 4. On January 1, 2016, BMO Co. had 474,000 shares of common stock issued and outstanding. During 2016, the following stockholder equity transactions occurred: On March 1, 72,000 shares were acquired as treasury stock. On October 1, 24,000 of the treasury shares were sold. A 50% stock dividend was declared on December 1 on issued shares. 1 At December 31, 2016, how many shares of common stock are issued, and, for basic earnings per share computations for 2016, what is the weighted average of common shares outstanding? A. B. C. D. Shares issued Weighted average shares 639,000 711,000 687,000 711,000 630,000 630,000 639,000 639,000 5. In the computation of diluted earnings per share, the \"if converted\" method applied to convertible bonds that were issued two years ago will add A. B. C. D. interest expense avoided, net of income tax, to the numerator. the number of common shares assumed to be issued upon conversion as of the beginning of the year to the denominator. A and B. Neither A nor B. 6. In the computation of diluted earnings per share, the \"treasury stock\" method applied to dilutive employee stock options will add A. B. C. D. Nothing to the numerator. Common shares assumed to be issued upon exercise of the stock options that were not acquired as treasury stock at the average market price of the common for the year. A and B. Neither A nor B. 7. Which of the following statements is correct? A. A capital structure is complex even when it has convertible securities that are antidilutive. B. To report maximum dilution, each potentially dilutive security is loaded into dilutive earnings per share starting with the securities that have the highest incremental per share effect. C. A and B. D. Neither A nor B. 2 Use the information below to answer questions 8 and 9. Farrell Inc. provided you with the following information for the year ended December 31, 2016: Income from continuing operations $565,000 Net income $425,000 Weighted average shares of common stock outstanding 200,000 5,000 shares of 5%, $100 par value convertible preferred that is convertible into 15,000 shares of common stock; the preferred is not cumulative; of the $40,000 of cash dividends declared during 2016, $30,000 were paid in cash; the preferred stock was issued in 2014. 8. What is basic earnings per share for 2016 on Income from continuing operations A. B. C. D. $2.625 $2.70 $2.70 $2.825 Net income $2.00 $2.125 $2.00 $2.125 9. Which of the following statements is correct for 2016? A. B. C. D. Diluted earnings per share on income from continuing operations is $2.53 (rounded). Diluted earnings per share on net income is $1.98 (rounded). A and B. Neither A nor B. 10. Which of the following ASC citations covers how contingent shares affect the computation of basic and diluted earnings per share when the contingency is based on the market price of the common stock at a future date? A. B. C. D. 260-10-45-48. 260-10-45-52. 260-10-45-53. 260-10-45-54 3 11. The following information relates to Victor Inc.'s earnings per share computations for 2016: Net income Preferred dividends declared on nonconvertible preferred stock Weighted average of common shares outstanding $ 1,350,000 202,500 900,000 Additional information for 2016: At December 31, 2016, the company had the following stock options outstanding from 2015 and 2016: Year Grant date 2015 1/1/15 2016 1/1/16 Number of options 100,000 200,000 Exercise price Exercisable beginning on $51 1/1/17 $45.50 1/1/18 During 2016, the average market price per share of Victor's common stock was $50, while the closing market price on December 31 was $52. For the year ended December 31, 2016, what is Victor's diluted earnings per share on net income and is it reported on the face of Victor's income statement? Reported on the face Diluted EPS of the income statement A. B. C. D. $1.26 $1.24 $1.25 $1.25 No Yes Yes No 12. According to the ASC, which of the following statements is correct? A. The objective of basic earnings per share is to measure the performance of an entity over the reporting period. B. Dilution is defined as the reduction in diluted EPS resulting from the conversion of convertible securities, the exercise of options or warrants, or the issuance of other shares upon the satisfaction of certain conditions. C. A and B. D. Neither A nor B. 4 Use the information below to answer questions 13-15. On June 30, 2013, Locust, Inc. issued $100,000 of 6.5% convertible bonds at a discount. Each $1,000 bond is convertible into 30 shares of common stock beginning in 2018 and 40 shares of common stock beginning in 2020. 10,000 shares of Locust common stock were outstanding throughout 2016. None of the convertible bonds were converted during 2016. Locust declared cash dividends of $3,500 during 2016, $1,400 of which was on Locust's nonconvertible noncumulative preferred stock. The following amounts were reported in Locust's income statement for the year ended December 31, 2016: Revenues Operating expenses Interest expense on bonds Income before income tax Income taxes Net income $977,000 918,000 _7,000 52,000 18,200 $ 33,800 13. What is Locust's basic earnings per share for 2016? A. $3.42. B. $3.38. C. $3.24. D. $3.03. 14. In the computation of Locust's diluted earnings per share for 2016, what is the dollar amount of the numerator? A. $36,950. B. $38,350. C. $39,400. D. $34,850. 15. Which of the following statements is correct? A. Locust's convertible bonds are potentially and actually dilutive for 2016. B. Locust's diluted earnings per share for 2016 was $2.74. C. A and B. D. Neither A nor B. 5 Use the information below to answer questions 16-18. Clout Corp. reported net income of $500,000 for 2016. The company had 300,000 weighted average shares of common stock outstanding during 2016. The company also had the following two potentially dilutive securities outstanding during all of 2016: 20,000 shares of convertible preferred stock upon which a dividend of $50,000 was declared during 2016; the noncumulative preferred is convertible into 25,000 shares of common; $400,000 face value of convertible bonds that are convertible into 20,000 common shares; interest expense related to the bonds was $25,000 for 2016; The income tax rate is 35%. 16. For 2016, what is Clout's diluted earnings per share that would be reported on the face of the income statement (rounded)? A. $1.44. B. $1.46. C. $1.48. D. $1.49. 17. Which of the following statements is correct? A. B. C. D. The convertible bonds were both potentially and actually dilutive for 2016. The convertible preferred was potentially dilutive but not actually dilutive for 2016. A and B. Neither A nor B. 18. Assume all the information provided for Clout Corp. is the same except for one item net income for 2016 was $275,000 instead of $500,000. If net income for 2016 was $275,000, then which of the following statements is correct? A. B. C. D. The convertible bonds were both potentially and actually dilutive for 2016. The convertible preferred was potentially dilutive but not actually dilutive for 2016. A and B. Neither A nor B. 6 Questions 19 and 20 are based on the financial statements of Berkshire Hathaway for the year ended December 31, 2015. 19. Which of the following statements is correct for the year ended December 31, 2015? A. B. C. D. Berkshire Hathaway's net earnings per equivalent Class A common share increased more than 25% since 2013. Berkshire Hathaway has a simple capital structure. A and B. Neither A nor B. 20. Which of the following statements is correct for the year ended December 31, 2015? A. B. C. D. Net earnings per equivalent Class A common share was $14,656. Net earnings per Class B common share was $9.77. A and B. Neither A nor B. 7