000 SHARES OF COMMON STOCK WERE PURCHASED BY THE COMPANY AS TREASUR...

45,000 shares of common stock were purchased by the company as treasury stock on October 1.Jupiter Corp.'s diluted earnings per share for 20X5 are closest to:غ A)$159.13.غ B)$123.02.ض C)$117.75.ExplanationTo compute Jupiter's basic earnings per share (EPS) use the formula: (net income − preferred dividends) / weighted averagecommon shares outstanding. Weighted average common shares outstanding = [(115,000 × 12) + (60,000 × 9) - (45,000 × 3)] / 12= 148,750. Basic EPS = $18,300,000 / 148,750 = $123.02.Using the treasury stock method, if the warrants were exercised cash inflow would be 200 × $100 × 100 = $2,000,000. Thenumber of Jupiter shares that can be purchased with this cash at the average share price is $2,000,000 / $150 = 13,333. The netnumber of shares that would have been created is 20,000 − 13,333 = 6,667. Diluted EPS = $18,300,000 / (148,750 + 6,667) =$117.75. Since diluted EPS is less than basic EPS, the warrants are dilutive.

Question #61 of 90

Question ID: 414183

Quad Associates, Inc.'s net income for 2005 was $892,000 with 400,000 shares outstanding. The tax rate was 40 percent. Quadhad 2,000 six percent $1,000 par value convertible bonds that were issued in 2004. Each bond was convertible into 40 shares ofcommon stock. Quad, Inc.'s diluted earnings per share (Diluted EPS) for 2005 was closest to:ض A)$2.01.$2.23.غ C)$2.41.Quad's basic EPS (net income / weighted average common shares outstanding) was $892,000 / 400,000 = $2.23.Diluted EPS is calculated under the assumption that the convertible bonds are converted into common stock, the bond interestnet of tax is restored to net income, and the additional common shares are added to the denominator of the equation. Quad'sdiluted EPS was [$892,000 + (2,000 × $1,000 × 0.06)(1 − 0.40)] / [400,000 + (2,000 × 40)] = $2.01. Since diluted EPS is lessthan basic EPS, we know that the bonds are dilutive and should be considered in calculating diluted EPS.

Question #62 of 90

Question ID: 414086

At the beginning of 2007, Thunderbird Company started a 3-year construction project. The following data relates to the project:

Contract price $100 million

Costs incurred in 2007 $50 million

Progress billings $40 million

Collection of progress

$37 million

billings

Because of cost overruns, Thunderbird cannot reliably estimate the total cost of the project. However, Thunderbird expects thatits costs incurred so far are recoverable. What amount of revenue should Thunderbird recognize for the year ended 2007 underU.S. Generally Accepted Accounting Principles (U.S. GAAP) and International Financial Reporting Standards (IFRS)?U.S. GAAP IFRS$37 million $40 million$0 $0$0 $50 millionThe completed-contract method must be used under U.S. GAAP since Thunderbird cannot reliably estimate the project's cost.Under the completed-contract method, no revenue is recognized until the project is complete. Under IFRS, when total costcannot be reliably estimated, revenue is recognized to the extent that recovering contract costs is probable. Since Thunderbirdincurred $50 million of cost in 2007, $50 million of revenue is recognized.

Question #63 of 90

Question ID: 414135

The following information pertains the QRK Company:One million shares of common stock outstanding at the beginning of 2005.