000,000.EXPLANATIONTHE WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUT...

25,000,000.ExplanationThe weighted average number of common shares outstanding is the number of shares outstanding during the year weighted bythe portion of the year they were outstanding. Since no new common shares were issued in 2005, and there were 25 millionshares at the end of 2004, there are 25 million shares at the end of 2005. Note that the preferred stock shares do not affect thecommon shares outstanding.

Question #7 of 90

Question ID: 414075

Under U.S. GAAP, when an unreliable estimate of costs exists and ultimate payment is assured, which of the following revenuerecognition methods should be used?غ A)Percentage-of-completion method.ض B)Completed contract method.غ C)Cost recovery method.The key word is "unreliable." The completed contract method is used under U.S. GAAP when cost estimates are unreliable. Thepercentage-of-completion method recognizes profit corresponding to the percentage of cost incurred to total estimated costsassociated with long-term construction contracts. Percent-of-completion is used where contracts and cost estimates are reliable.The cost recovery method is similar to the installment sales method but is more conservative. Sales are recognized when cash isreceived, but no gross profit is recognized until all of the cost of goods sold is collected.

Question #8 of 90

Question ID: 414176

Rushford Corp.'s net income is $16,500,000 with 300,000 shares outstanding. The tax rate is 40%. The average share price forthe year was $372. Rushford has 50,000, 9%, $1,000 par value convertible bonds outstanding. Each bond is convertible into twoshares of common stock.Rushford Corp.'s basic and diluted earnings per share (EPS) are closest to:Basic EPS Dilutied EPS$55.00 $51.56$55.00 $48.00$65.63 $48.00Rushford's basic EPS (net income / weighted average common shares outstanding) is $16,500,000 / 300,000 = $55.00. DilutedEPS is calculated under the assumption that the convertible bonds were converted into common stock, the bond interest net oftax is restored to net income, and the additional common shares are added to the denominator of the equation. Rushford'sdiluted EPS is [$16,500,000 + (50,000 × $1,000 × 0.09)(1 - .40)] / (300,000 + (50,000 × 2) = $48.00.

Question #9 of 90

Question ID: 414143

A complex capital structure would typically contain:bank notes.convertible bonds.variable rate notes.A complex capital structure is one that contains securities that have the potential to dilute a firm's earnings per share. Forexample, convertible bonds, convertible preferred stock, options, and warrants have the potential to dilute earnings per shareupon conversion or exercise.

Question #10 of 90

Question ID: 414180

Young Distributors, Inc. issued convertible bonds two years ago, and those bonds are the only potentially dilutive security Younghas issued. In 20X5, Young's basic earnings per share (EPS) and diluted EPS were identical, but in 20X4 they were different.Which of the following factors is least likely to explain the difference between basic and diluted EPS? The:bonds were antidilutive in 2005 but not in 2004.average market price of Young common stock increased in 20X5.bonds were redeemed by Young Distributors at the beginning of 2005.Average stock price is not a factor in determining whether convertible bonds are dilutive or antidilutive.If Young redeemed the bonds, they would have no potentially dilutive securities outstanding in 20X5 and diluted EPS, if thecompany reported it, would equal basic EPS. Basic and diluted EPS would also be equal in 20X5 if the bonds were antidilutive inthat year.

Question #11 of 90

Question ID: 434272

Zichron, Inc., had the following equity accounts on December 31:Common stock: 20,000 shares.Preferred stock A: 10,000 shares convertible into common on a 2 for 1 basis, dividend of $40,000 was declared during theyear.Preferred stock B: 10,000 shares, convertible to common on a 4 for 1 basis, dividend of $5,000 was declared during the year.The company reported net income of $120,000 and paid a $20,000 dividend to its common shareholders.Basic earnings per share for the year are:ض A)$3.75.غ B)$2.00.$2.75.Basic EPS = ($120,000 − 40,000 − 5,000) / 20,000 shares = $3.75.

Question #12 of 90

Question ID: 414113

The First National Bank is a commercial bank that specializes in consumer financing, particularly automobile loans. The majorityof the loans are funded from customer deposits. In addition, the bank purchases various investment securities with availablecash. The investments are debt securities and have an average maturity date of less than 30 days. Should First National Bankreport the interest received from the consumer loans and the interest received from the investment securities as an operating oras a nonoperating component in its year-end income statement?Consumer loans InvestmentsecuritiesOperating OperatingOperating NonoperatingNonoperating OperatingInterest received from customers and interest received from investments are a part of normal operations of a financial institution.Thus, the First National Bank will report the interest income from both sources as components of operating income.

Question #13 of 90

Question ID: 434278

BWT, Inc. shows the following data in its financial statements at the end of the year. Assume all securities were outstanding forthe entire year.