$2.77. $2.81. $3.05. $3.33. 4,000,000 and 4,000,000 4,000,000 and 4,100,000 4,00

Question

       $2.77.
       $2.81.
       $3.05.
       $3.33.

       4,000,000 and 4,000,000
       4,000,000 and 4,100,000
       4,000,000 and 4,400,000
       4,400,000 and 5,200,000

       No compensation since the plan is used to raise capital, not compensate employees.
       Compensation expense of $5,500,000.
       Compensation expense of $18,700,000.
       Compensation expense of $3,740,000.

       $0.
       $80,000.
       $240,000.
       $480,000.

       $2.14.
       $2.25.
       $2.35.
       $2.46.

       $64,000
       $32,000
       $15,000
       $0

       $515,000.
       $500,000.
       $480,000.
       $494,400.

       $2.21.
       $2.42.
       $2.51.
       $2.70.

1. Hanson Co. had 200,000 ordinary shares, 20,000 shares of convertible preference shares, and $1,000,000 of 10% convertible bonds outstanding during 2011. The preference shares are convertible into 40,000 ordinary shares. During 2011, Hanson paid dividends of $1.20 per share on the ordinary shares and $4 per share on the preference shares. Each $1,000 bond is convertible into 45 ordinary shares. The net income for 2011 was $800,000 and the income tax rate was 30%.

Diluted earnings per share for 2011 is (rounded to the nearest penny) (Points : 4)

Explanation / Answer

Answer 1. c. $3.05 Diluted Earnings = (Net Income After Tax + Interest Exp. On convertible Bonds After Tax) / (Shares + Other Convertble Instruments) Diluted Earnings = (800000 + 70000) / (200000 + 40000 + 45000) = $3.05 per share Answer 2. B. 4,000,000 and 4,100,000 Answer 3. no Compensation since the plan is to raise the capital, not compensate employeess. Answer 7. d. $480000 (16000 shares X $30) Answer 9. c. $2.35 Diluted Earnings = (600000+70000)/(200000+40000+45000) =$2.35 Answer 10 . $32000 ($64000 /2) Answer 11. D. $494400 ($480,000 ÷ $500,000) × ($500,000 × 1.03) = $494,400 Answer 12. D. $2.70

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