000 / 12 = 7,000 AVERAGE SHARESTOTAL DILUTED SHARES = 7,000...

84,000 / 12 = 7,000 Average sharesTotal diluted shares = 7,000 (from convertible bonds) + 132,000 (from stock) = 139,000

Question #35 of 90

Question ID: 414110

On January 1, 2007, Sneed Corporation purchased machinery costing $8 million with a salvage value of $1 million. For the yearended 2007, Sneed recognized depreciation expense of $3.2 million from the machinery using the double-declining-balancemethod. Should the depreciation expense be reported as an operating component in the income statement, and what is theestimated useful life of the machinery?Operating expense Useful lifeغ A)No 5 yearsغ B)Yes 4 yearsض C)Yes 5 yearsExplanationDepreciation expense is reported as an operating component in the income statement. Given the first year depreciation expenseof $3.2 million, and the original cost of $8 million, the declining balance percentage is 40% ($3.2 million depreciation expense /$8 million cost). The double declining balance percentage is equal to 2 / useful life = 40%. Thus, the useful life is 5 years (2 /0.40).

Question #36 of 90

Question ID: 414229

Where in the financial statements should a firm recognize the unrealized gains and losses on cash flow hedging derivatives andthe unrealized gains and losses on available-for-sale securities?Cash flow hedging derivatives Available-for-sale securitiesض A)Other comprehensive income Other comprehensive incomeOther comprehensive income Net incomeغ C)Net income Other comprehensive incomeUnrealized gains and losses from cash flow hedging derivatives and unrealized gains and losses from available-for-salesecurities are not recognized in the income statement; rather, they are both recognized as a component of stockholders' equityas a part of other comprehensive income.

Question #37 of 90

Question ID: 414083

Under U.S. GAAP, if a reliable estimate of total costs of a long-term contract does not exist, which of the following revenuerecognition methods should be used?Completed contract method.Percentage-of-completion method.Cost recovery method.The percentage-of-completion method is used when ultimate payment is assured and revenue is earned as costs are incurred.Profit is recognized corresponding to the percentage of costs incurred to the total estimated.If the total cost of a long-term contract cannot be estimated reliably, U.S. GAAP requires the completed contract method to beused for revenue recognition. The cost recovery method is used for installment sales when future cash collections are notassured.

Question #38 of 90

Question ID: 414164

Assume that the exercise price of an option is $6, and the average market price of the stock is $10. Assuming 802 options areoutstanding during the entire year, what is the number of shares to be added to the denominator of the diluted earnings per share(EPS)?