Study Guides (247,973)
Canada (121,209)
York University (10,191)
ADMS 3595 (11)
Sung Kwon (10)

A3595E2W12_blue.doc

13 Pages
255 Views
Unlock Document

Department
Administrative Studies
Course
ADMS 3595
Professor
Sung Kwon
Semester
Winter

Description
YORK UNIVERSITY Name _____________,_________________ SCHOOL OF ADMINISTRATIVE STUDIES (Last) (First) Professor Sung Kwon (Course Director) and Ms. Patricia Farrell ADMS 3595 I.D. # ______________________________ Intermediate Financial Accounting II EXAM II, Winter 2012 Section ______________________________ (Blue Version) Type Points Available Points Earned I. Multiple Choice 30 @ 2 = 60 _____________ II. Shareholder’s Equity 15 _____________ III. Derivative Instruments 12 _____________ IV. Earnings Per Share 13 _____________ ___ Total 100 ___ _____________ INSTRUCTIONS 1. Check exam carefully to be sure you have all twelve pages. 2. When you are instructed to begin the exam, put your name and student I.D. number on this cover sheet and indicate your section number. 3. You have 120 minutes to complete the exam. 4. Please fill in a scantron form with a pencil only. 5. Show your calculations and work to support your answers for problem questions. 6. Write in pen or pencil neatly because if we cannot understand what you have written, we cannot give you marks. 7. The exam is closed-book, and you can use only nonprogrammable calculators (i.e., no laptop/pocket computers are allowed) into the exam room. 8. When the end of the exam is announced, stop writing and return immediately your completed scantron form along with your exam paper to an invigilator. 2 I. Multiple Choices: Choose the best answer. (30 @ 2 points) Put the letter corresponding to the best answer on the SCANTRON form and circle the best answer on the exam paper for your future reference. (Only your answers on the SCANTRON form will be graded.) 1. Income available to common shareholders is calculated as, a. net income after taxes b. net income less amounts set aside for other securities c. Income before interest and taxes d. Revenue less expenses related to ongoing business operations. 2. In calculating basic earnings per share, if the preferred shares are cumulative, the amount that should be deducted as an adjustment to the numerator is the a. preferred dividends in arrears. b. preferred dividends in arrears times (one minus the income tax rate). c. annual preferred dividend times (one minus the income tax rate). d. annual preferred dividend 3. Antidilutive securities a. should be ignored in all earnings per share calculations. b. should be included in the calculation of diluted earnings per share but not basic earnings per share. c. are those whose inclusion in earnings per share calculations would cause basic earnings per share to exceed diluted earnings per share. d. include call options and warrants whose exercise price is less than the average market price of common shares. 4. Which of the following statements is incorrect? a. Convertible financial instruments have the potential to dilute earnings per share, and should be taken into account in calculating diluted EPS. b. Written options and their equivalents must be included in the diluted EPS calculations. c. Purchased options will always be antidilutive. d. The purpose of presenting both EPS numbers is to inform financial statement users of situations that will likely occur and to provide worst-case dilutive situations. 5. At December 31, 2012, Beta Corp had 500,000 common shares outstanding, 400,000 of which were issued and outstanding throughout the year and 100,000 of which were issued on October 1, 2012. Net income for the year ended December 31, 2012, was $510,000. There are no preferred shares issued. Basic earnings per share for 2012 would be a. $1.02. b. $1.13. c. $1.20. d. $1.27. 6. At December 31, 2011, Epsilon Ltd had 500,000 common shares outstanding (no preferred shares issued). On October 1, 2012, an additional 100,000 common shares were issued. In addition, Epsilon had $5,000,000 of 6% convertible bonds outstanding at December 31, 2011, which are convertible into 225,000 common shares. No bonds were converted in 2012. The net income for the year ended December 31, 2012 was 3 $1,500,000. Assuming the income tax rate was 30%, the diluted earnings per share for 2012 would be a. $3.26. b. $2.40. c. $2.28. d. $2.00. 7. The reverse treasury stock method is used for a. written call options. b. written put options. c. convertible preferred shares. d. convertible bonds. 8. Which of the following statements is incorrect? a. Options that are out of the money are ignored in earnings per share calculations. b. The treasury stock method is used for forward sales contract. c. Corporations that have only antidilutive securities are not permitted to increase their earnings per share and are required to report only basic earnings per share. d. Contingently issuable shares are never included in diluted earnings per share calculations. 9. At December 31, 2011, Eta Corp had 800,000 common shares outstanding. In addition, Eta had 300,000 non-cumulative preferred shares outstanding, which were convertible into 500,000 common shares. During 2012, Eta paid cash dividends of $300,000 to the common shares and $200,000 to the preferred shares. Net income for 2012 was $1,700,000 and the income tax rate was 40%. Diluted earnings per share for 2012 is a. $0.93. b. $1.26. c. $1.31. d. $1.88. 10. At December 31, 2011, Iota Inc had 6,000,000 common shares outstanding. An additional 1,000,000 common shares were issued on April 1, 2012, and 500,000 more on July 1, 2012. On October 1, 2012, Iota issued 25,000, $1,000 par value, 8% convertible bonds. Each bond is convertible into 20 common shares. No bonds were converted in 2012. What is the number of shares to be used in calculating 2012 basic earnings per share and diluted earnings per share, respectively? a. 7,000,000 and 7,125,000. b. 7,000,000 and 7,250,000. c. 7,000,000 and 7,500,000. d. 7,500,000 and 8,500,000. 11. Which of the following is NOT a characteristic of a derivative? a. their value changes in response to the underlying instrument. b. they require little or no initial investment. c. they are recorded in the accounting records at cost. d. they are settled at a future date. Use the following information for questions 12 through 15. On April 1, 2012, Gamma Corp. purchases a call option for $500, which gives it the right to buy 1,000 shares of Delta Inc. for $30 each until December 1, 2012. Delta Inc. shares are currently 4 trading for $29 each. At June 30, 2012, the options are trading at $4,200 and the shares at $34 each. At December 1, 2012, the options expire with no value. 12. The intrinsic value of the option at April 1, 2012 is a. $ 0. b. $ 500. c. $1,000. d. $4,800. 13. The time value of the option at April 1, 2012 is a. $ 0. b. $ 500. c. $ 4,800. d. $30,000. 14. At June 30, 2012, Gamma’s quarter end, the adjusting entry would be a. No entry required. b. Derivatives – Financial Assets.....................................4,300... Gain.....................................................................4,300.. c. Derivatives – Financial Assets.....................................4,300... Other Comprehensive Income.................................... 4,300 d. Derivatives – Financial Assets.....................................3,700... Gain.....................................................................3,700.. 15. At December 1, 2012, Gamma’s entry would be a. No entry required. b. Loss ..............................................................4,200................. Derivatives – Financial Assets.................................... 4,200 c. Loss ..............................................................4,300................. Derivatives – Financial Assets ................................... 4,300 d. Loss ..............................................................4,800................. Derivatives – Financial Assets ................................... 4,800 16. IFRS defines financial risk to include:
More Less

Related notes for ADMS 3595

Log In


OR

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


OR

By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.


Submit