000, 6 PERCENT $1,000 PAR VALUE CONVERTIBLE BONDS, WHICH ARE CONVERT...

2,000, 6 percent $1,000 par value convertible bonds, which are convertible at a ratio of 25 shares for each bond, wereoutstanding the entire year.Doors, Inc.'s tax rate is 40%.Doors, Inc.'s diluted earnings per share (Diluted EPS) for 2005 was closest to:ض A)$2.96.غ B)$3.72.غ C)$3.28.ExplanationDoors basic earnings per share (EPS) was ($372,000 / 100,000 =) $3.72. If the bonds were converted, interest payments wouldnot have been made. Net income is increased by the interest paid on the bonds net of taxes: $372,000 + (($1000 × 2,000 × 0.06)× (1 − 0.40)) = $444,000.Diluted EPS was $444,000 / (100,000 + (2,000 × 25)) = $2.96.

Question #72 of 90

Question ID: 414082

When evaluating the differences between two revenue recognition policies, an analyst should view the policy as moreconservative which:غ A)is more dependent on management estimates.ض B)recognizes revenue later.results in less leverage on the balance sheet.Recognizing revenue later rather than sooner is considered more conservative. More aggressive (less conservative) revenuerecognition can result in less leverage by increasing assets.

Question #73 of 90

Question ID: 414120

At the beginning of 2004, the Alaska Corporation had 2 million shares of common stock outstanding and no preferred stock. Atthe end of August, 2004, Alaska issued 600,000 new shares of common stock. If Alaska reported net income equal to $8.8million, what was the firm's earnings per share for 2004?$4.00.$3.67.$3.38.EPS = earnings available to common shareholders divided by the weighted average number of common shares outstanding.With no preferred shareholders, all of net income is available to the common shareholders. The weighted average number ofshares outstanding equals the original 2 million shares plus 4/12 of the additional 600,000 shares. The 4/12 weight is usedbecause the new shares were only outstanding 4 months of the year. Thus, EPS = $8.8 million / [2 million + (4/12)(600,000)] =