APRIL 2025 CHAPTER 2

Question 1

On the settlement date how is foreign currency amount calculated?

Answer 1

Using the spot rate ar first then it’s revalued at the financial statement date results in gain or loss

Question 2

Formula to calc the diluted earnings per share?

Answer 2

Diluted EPS = Adjusted Net Income / Common Stock + Converted Shares

Question 3

When cause an antidilutive EPS?

Answer 3

option price is higher than the market price that cause the the EPS Antidilutiuve

Question 4

How is Convertible Preferred Stock calc for Diluted EPS?

Answer 4

When the preferred Dividends are added to Net Income and the remaining are added to common stock

Question 5

How is Convertible Bonds calc for diluted Stock?

Answer 5

after tax interest expense is added back to net income since they no longer need to pay the interest conversion

Question 6

When calc the Diluted EARNINGS PER SHARE how is it calc piece by piece?

Answer 6

Step 1 - adjustments for the numerator

Calc the after tax amount which would be added to the NET INCOME the information would be coming from the Convertible bonds

Face amount x 6% tax rate (1.0 -.30) = after tax expense

additionally we need to add Cumulative convertible preferred stock

10,000 preferred stock x par x 10 = 20,000 (example)

Step 2 - Calc the adjustments of BEPS Denominator

Denominator is increased by the weighted avg numbers

Question 7

When we get a problem with Weighted AVG cost of

Jan - Feb Number of shares 24,000

How would be start of calculating that?

Answer 7

Jan - Feb Number of Shares 24,000 x 2/12

March - June 29,400 x 4/12

Question 8

How to calc Weighted AVG of Common Stock outstanding?

Answer 8

100,000 x 12 / 12 = 105,000
30,000 x 9 / 12 = 23,625
36,000 x 7 / 12