Expert Answer :Keiser ACG411 week 3 quiz

Solved by a verified expert :Question 1Blue Cab Company had 50,000 shares of common stock outstanding on January 1, 2016. On April 1, 2016, the company issued 20,000 shares of common stock. The company had outstanding fully vested incentive stock options for 5,000 shares exercisable at $10 that had not been exercised by its executives. The end-of-year market price of common stock was $13 while the average price for the year was $12. The company reported net income in the amount of $269,915 for 2016. What is the diluted earnings per share (rounded)? $3.60. $4.10. $4.50. $3.81.5 points Save AnswerQuestion 2Restricted stock units (RSUs): are a grant valued in terms of a set number of shares of company stock. are reported as a liability if payable in shares rather than cash. are recorded based on a value estimated by a restricted stock valuation model. represent shares issued at the date of grant that must be returned if the recipient fails to satisfy the vesting requirement.5 points Save AnswerQuestion 3Wall Drugs offered an incentive stock option plan to its employees. On January 1, 2016, options were granted for 60,000 $1 par common shares. The exercise price equals the $5 market price of the common stock on the grant date. The options cannot be exercised before January 1, 2019, and expire December 31, 2020. Each option has a fair value of $1 based on an option pricing model. What is the total compensation cost for this plan? $0. $60,000. $240,000. $300,000.5 points Save AnswerQuestion 4When preferred stock carries a redemption privilege, the shareholders may: Purchase new shares as they become available. Exchange their preferred shares for common shares. Surrender the preferred shares for a specified amount of cash. Purchase treasury shares ahead of common shareholders.5 points Save AnswerQuestion 5When several types of potential common shares exist, the one that enters the computation of diluted EPS first is the one with the: Highest incremental effect. Higher numerator. Median incremental effect. Lowest incremental effect.5 points Save AnswerQuestion 6Characteristics of the corporate form that have led to the growth of this form of business ownership include all of the following except: Ease of raising capital. Low government regulation. Limited liability. Ease of ownership transfer.5 points Save AnswerQuestion 7Any dividend that is considered to be a liquidating dividend will: Reduce retained earnings. Reduce paid-in capital. Increase paid-in capital. Reduce the common stock account.5 points Save AnswerQuestion 8Two of the three primary account classifications within shareholders’ equity are: Preferred stock and retained earnings. The par value of common stock and retained earnings. Paid-in capital and retained earnings. Preferred and common stock.5 points Save AnswerQuestion 9When we assume conversion of convertible bonds, the numerator is increased by: The amount of after-tax interest. The gross amount of interest. The weighted-average interest. The amount of cash paid during the current year for interest.5 points Save AnswerQuestion 10Restrictions on retained earnings must be disclosed in the body of the balance sheet. True False5 points Save AnswerQuestion 11In computing diluted earnings per share, the treasury stock method is used for: Stock warrants. Stock splits. Reverse stock splits. Convertible preferred stock.5 points Save AnswerQuestion 12When a company’s only potential common shares are convertible bonds: Diluted EPS will be greater if the bonds are actually converted than if they are not converted. Diluted EPS will be smaller if the bonds are actually converted than if the bonds are not converted. Diluted EPS will be the same whether or not the bonds are converted. The effect of conversion on diluted EPS cannot be determined without additional information.5 points Save AnswerQuestion 13The Model Business Corporation Act: Uses the words “common” and “preferred” in describing distinguishing characteristics of stock. Defines legal capital as the amount of net assets not available for distribution to shareholders. Provides guidance for choosing an appropriate par value for new issues of stock. Has affected the laws of most states.5 points Save AnswerQuestion 14The net assets of a corporation are equal to: Contributed capital. Retained earnings. Shareholders’ equity. None of these.5 points Save AnswerQuestion 15ABC declared and paid cash dividends to its common shareholders in January of the current year. The dividend: Will be added to the numerator of the earnings per share fraction for the current year. Will be added to the denominator of the earnings per share fraction for the current year. Will be subtracted from the numerator of the earnings per share fraction for the current year. Has no effect on the earnings per share for the coming year.5 points Save AnswerQuestion 16A small stock dividend is defined as one that is: Less than or equal to 40%. Less than 40%. Less than or equal to 10%. Less than 25%.5 points Save AnswerQuestion 17Zeba Company granted 27 million of its no par common shares to executives, subject to forfeiture if employment is terminated within three years. Zeba’s common shares have a market price of $10 per share on January 1, 2016, the grant date. Required: When calculating diluted EPS at December 31, 2017, what will be the net increase in the denominator of the EPS fraction if the market price of the common shares averaged $10 during 2017? Path: pWords:010 points Save AnswerQuestion 18Identify the three common forms of business organization and the primary difference in the way we account for them. Show the equity section of a balance as examples of each type.