000 SHARES OF 3%, $500 PAR VALUE PREFERRED SHARES, CONVERTIBLE INTO...

6,000 shares of 3%, $500 par value preferred shares, convertible into common shares at a rate of 40 common shares foreach preferred share, were outstanding for the entire year.Able's basic and diluted earnings per share (EPS) are closest to:Basic EPS Diluted EPSض A)$0.55 $0.52غ B)$0.64 $0.64غ C)$0.55 $0.55ExplanationAble's basic earnings per share ((Net Income − Preferred Stock Dividends) / weighted average shares outstanding) for 2004 was[($720,000 − ($500 × 6,000 × 0.03) − ($1,000 × 1,000 × 0.08)] / 1,000,000 = $0.55. If the convertible preferred were converted tocommon stock on January 1, 6,000 × 40 = 240,000 additional shares would have been issued. Also, dividends on the convertiblepreferred would not have been paid.So diluted EPS was ($720,000 − 80,000) / (1,000,000 + 240,000) = $0.52.

Question #28 of 90

Question ID: 414198

Which of the following statements regarding basic and diluted EPS is least accurate?غ A)A simple capital structure contains no potentially dilutive securities.Dilutive securities decrease EPS if they are exercised or converted to common stock.ض C)Antidilutive securities decrease EPS if they are exercised or converted.Antidilutive securities increase EPS if exercised or converted to common stock.

Question #29 of 90

Question ID: 414065

Guidance from the U.S. Securities and Exchange Commission regarding the criteria for revenue recognition least likely specifiesthat there must be:a determined or determinable price.evidence of an arrangement between the buyer and the seller.reasonable assurance that the product will be delivered or the service will be rendered.One of the SEC's criteria for revenue recognition is that the product has been delivered or the service has been rendered. Theother criteria are evidence of an arrangement between the buyer and seller; the price has been determined or is determinable;and the seller is reasonably assured of collecting money.

Question #30 of 90

Question ID: 414226

Is an acquisition of treasury stock or a loss from the write-down of inventory under the lower-of-cost-or-market rule included incomprehensive income?Inventory write-down Acquisition of treasury stockYes NoNo NoNo YesComprehensive income includes all transactions that affect shareholders' equity except transactions with shareholders. Thus,any transaction that affects net income would also affect comprehensive income. Since the inventory write-down is included innet income, it is part of comprehensive income. The acquisition of treasury stock is a transaction with shareholders; thus, it is nota part of comprehensive income.

Question #31 of 90

Question ID: 414205

Which of the following statements regarding the treasury stock method of computing diluted shares is least accurate? Thetreasury stock method:is used when the exercise price of the option is less than the average market price.ض B)assumes that the hypothetical funds received by the company from the exercise of the options areused to sell shares of the company's common stock in the market at the average market price.increases the total number of shares by less than the number that the exercise of the options wouldcreate.The treasury stock method assumes any funds received by the company from the exercise of the options are used to purchaseshares (not sell shares) of the company's common stock in the market at the average market price.

Question #32 of 90

Question ID: 414178

Selected information from Indigo Corp.'s financial activities in the year 20X9 included the following:Net income is $5,600,000.The tax rate is 40%.