chapter 3 libro 2 Flashcards
ddb depreciation
(2/useful life) x (cost- accumulated depreciation)
discontinued operations
A discontinued operation is one that management has decided to dispose of, but either has not yet done so, or has disposed of in the current year after the operation had generated income or losses.
At the beginning of the year, Triple W Corporation purchased a new piece of equipment to be used in its manufacturing operation. The cost of the equipment was $25,000. The equipment is expected to be used for 4 years and then sold for $4,000. Depreciation expense to be reported for the second year using the double-declining-balance method is to:
A. $5,250. B. $6,250. C. $7,000.
Year 1: (2 / 4) × 25,000 = $12,500. Year 2: (2 / 4) × (25,000 – 12,500) = $6,250.
Which of the following transactions would be reported below income from continuing operations, net of tax?
A. Gain or loss from the sale of equipment used in a firm’s manufacturing operation.
B. A change from the accelerated method of depreciation to the straight-line method.
C. The operating income of a physically and operationally distinct division that is currently for sale, but not yet sold.
C A physically and operationally distinct division that is currently for sale is treated as a discontinued operation. The income from the division is reported net of tax below income from continuing operations. Gains and losses on sales of operating assets, as well as depreciation expense, are reported pretax, above income from continuing operations. (LOS 17.e)
Which of the following statements about nonrecurring items is ?
A. Discontinued operations are reported net of taxes at the bottom of the income
statement before net income.
B. Unusual or infrequent items are reported before taxes above net income from
continuing operations.
C. A change in accounting principle is reported in the income statement net of taxes
after extraordinary items and before net income.
C A change in accounting principle requires retrospective application; that is, all prior period inancial statements currently presented are restated to re lect the change. (LOS 17.e)
Which of the following is considered a nonoperating transaction from the perspective of a manufacturing firm?
A. Dividends received from available-for-sale securities. B. Interest expense on subordinated debentures.
C. Accruing bad debt expense for goods sold on credit.
C Bad debt expense is an operating expense. The other choices are nonoperating items from the perspective of a manufacturing irm
During 20X6, ZZZ reported net income of $4,350,000 and had 2,000,000 shares of common stock outstanding for the entire year. ZZZ’s 7%, $5,000,000 par value preferred stock is convertible into common stock at a conversion rate of 1.1 shares for every $10 of par value. Compute basic and diluted EPS.
for diluted eps
net.inc - pref- dvid + convertible pref.dividesn/ wt.avg.shares + convert. pref. common shares
435000/2000000 + 550 000
se tu hai 2000, 1000$ par, 5% bonds e un tax rate pari a 30% cosa fai al numeratore per trovar convert. interest*(1-tax rate)
200010000,05*(1-0,3)
una formula per vedre se il debito convertibile è dilutive
convertible debt interest * (1-t)/ convertible debt shares
if this per share amount is greater than basic eps, the convertible debt is anti dilutive
nel caso delle stock options una via veloce per calcolare il net increase nel numero di common share da un potenziale esercizio dell stock options when the exercise price is less than average market price
(AMP - EP / AMP) * n
dove AMP= average market price
EP = exercise price
n = number of common share can be converted
Given the following information, how many shares should be used in computing diluted EPS?
300,000 shares outstanding.
100,000 warrants exercisable at $50 per share. Average share price is $55.
Year-end share price is $60.
A. 9,091. B. 90,909. C. 309,091.
C Since the exercise price of the warrants is less than the average share price, the warrants are dilutive. Using the treasury stock method to determine the denominator impact:
An analyst gathered the following information about a company:
100,000 common shares outstanding from the beginning of the year. Earnings of $125,000.
1,000, 7%, $1,000 par bonds convertible into 25 shares each, outstanding as of the beginning of the year.
The tax rate is 40%.
The company’s diluted EPS is to: A. $1.22.
B. $1.25. C. $1.34.
B
for check if the convertible bonds are dilutive we can use
cost - residual value/useful life
An analyst has gathered the following information about a company:
50,000 common shares outstanding from the beginning of the year. Warrants outstanding all year on 50,000 shares, exercisable at $20 per share. Stock is selling at year-end for $25.
The average price of the company’s stock for the year was $15.
How many shares should be used in calculating the company’s diluted EPS?
A. 16,667.
B. 50,000. C. 66,667.
B The warrants in this case are antidilutive. The average price per share of $15 is less than the exercise price of $20. The year-end price per share is not relevant. The denominator consists of only the common stock for basic EPS. (LOS 17.g, 17.h)
se exercise price > avarage share price è dilutive o anti dilutive?
anti dilutive
OCI components
- Foreign currency translation gains and losses.
- Adjustments for minimum pension liability.
- Unrealized gains and losses from cash low hedging derivatives.
- Unrealized gains and losses from available-for-sale securities.
