The following information is used in answering questions $14-20.$

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 $31,$ YR$11.$ 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 $12-31-$ YR$11.$

The company began the year with $500$ shares issued and outstanding. On $2-1-$YR$11$ an additional $100$ shares

were issued for cash. On $8-1-$YR$11,$ the company purchased and retired $200$ shares. 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 $12-31-$YR$11.$ The $10$ year bonds are dated $7-1-$YR$11,$

Bonds:

Unvested A total of $50($Series A$)$ stock options with an exercise price of $$2$ were granted to officers on $7-1-$YR$10.$

Options: $,$ The service period for these options is four years $(48$ months$)$ and the total compensation expense is $$200.$

At $12-31-$YR$11$ these options have not yet vested and no forfeitures have occurred. Once the options vest,

upon payment of $$2,$ each option is convertible into one share of common stock.

Preferred $,$$$100$ par value, $3\%$ cumulative preferred stock; $1,000$ shares authorized; $300$ shares issued and $200$ shares

Stock: outstanding at $12-31-$YR$11.$

This issue of preferred stock is not convertible into common stock. This preferred stock was issued during the

year ended $12-31-$YR$07.$ Dividends were last declared and paid for the year ended $12-31-$YR$09.$ Dividends for

both YR$10$ and YR$11$ have not been declared or paid. On $6-1-$YR$10$ the company purchased $100$ shares to be

held as treasury stock.

Market Prices During YR$11$ the common stock price averaged $$5,$ and ended at $$8$ per share on $12-31-$YR$11.$

of Securities: Also, during YR$11$ the market price of the options averaged $$2,$ and ended at $$2$ per option on

$12-31-$YR$11.$

$14.$ For the year ended December $31,$ YR$11$ the weighted average common shares outstanding was $($round to nearest whole share$)$:

a$.800$ cs b$.1,017$ cs c$.1,049$ cs d$.1,050$ cs e$.$ None of the above

$15.$ 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

$10$

$16.$ Simple EPS for the year ended $12-31-$YR$11$ is $($round to nearest penny$)$:

a$.$ $$1\mathrm{.}00$ b$.$ $$1\mathrm{.}38$ c$.$ $$1\mathrm{.}75$ d$.$ $$1\mathrm{.}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$.11$ 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$.5$ cs b$.10$ cs c$.11$ cs d$.20$ cs 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

$12-31-$YR$11.$ To avoid the effect of carryforward errors $($if any$)$ in your prior answers use the following values

in computing Diluted EPS.

Description

Assumed Correct Value For Purposes

of Answering Question $20$

Net Income $($Loss$)$ $$2,500$

Weighted Average Common Shares Outstanding $($question $14)500$ cs

Preferred Dividends $($question $15)$ $$500$

Bond Numerator Effect $($question $17)$ $$86$

Bond Denominator Effect $($question $18)20$ cs

Option Denominator Effect $($question $19)50$ cs

Given these figures, the company would report Diluted EPS of $($round to nearest penny$)$:

a$.$ $$3\mathrm{.}64$ b$.$ $$3\mathrm{.}66$ c$.$ $$4\mathrm{.}00$ d$.$ $$4\mathrm{.}01$ e$.$ None of the above.