Q16: Suppose a firm issues a 1,000 Convertible Preference Shares for with a par value of $100 each. Each preference share is convertible into 5 Ordinary Shares with a par value of $5. The credit entry to Share Premium Conversion Equity on the date of issue was for $200,000. Assume that the maturity date of the Convertible Shares has now arrived and the Convertible Preference Shares will be converted into Ordinary Shares.

The Credit Entry to the Share Premium Conversion Equity account on the date of conversion will be for an amount of:

Q17: Suppose a firm issues 2,000 Convertible Preference shares with a par value of $2 per share. The shares were issued at a price of $50 per share. The journal entry to record the transaction at the date of issue is:

a. Debit: Cash $100,000. Credit: Share Capital - Preference, $96,000. Share Premium Conversion Equity: $4,000.

b. Debit: Cash $100,000. Credit: Share Capital - Preference, $4,000. Share Premium Conversion Equity: $96,000.

c. Debit: Cash $100,000. Credit: Share Capital - Preference, $4,000. Share Premium Preference: $96,000.

d. Debit: Cash $200,000. Credit: Share Capital - Preference, $199,000. Share Premium Preference: $1,000.

e. None of these answers

Q18: Suppose a firm earns Net Income of $1,000,000. The company does not pay dividends.

At the start of the financial year the firm had 980,000 Ordinary Shares. On 31 March, the firm issued 20,000 Ordinary Shares for Cash. On 30 September, the firm issued a further 20,000 Ordinary Shares for Cash.

The firms Earnings Per Share (EPS) is:

Q19: A Convertible Bond is one which:

a. Grants the holder a car with a fully flexible roof

b. May be either converted into Ordinary Shares or may be repurchased (i.e., repaid)

c. Must be repaid in full in cash

d. Must be converted in full into Ordinary shares

e. None of these answers

Q20: Suppose a firm earns Net Income of $1,200,000. The company pays an Ordinary Dividend of $400,000 and a Preference Dividend of $200,000. Throughout the financial year, the firm has 100,000 Ordinary Shares and 200,000 Preference Shares. The firms Earnings Per Share (EPS) is:

Q21: Suppose a firm issues a 1,000 Convertible Preference Shares for with a par value of $100 each. Each preference share is convertible into 5 Ordinary Shares with a par value of $5. The credit entry to Share Premium Conversion Equity on the date of issue was for $200,000. Assume that the maturity date of the Convertible Shares has now arrived and the Convertible Preference Shares will be converted into Ordinary Shares.

The Entry to the Share Capital Preference account on the date of conversion will be for an amount of:

a. $100,000

b. $250,000

c. $25,000

d. $10,000

e. None of these answers