ADMS 3595 Study Guide - Treasury Stock, Call Option, Net Income
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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 ______________________________
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 _____________
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.
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
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
Professor sung kwon (course director) and ms. patricia farrell. 2: 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. ) Income available to common shareholders is calculated as: net income after taxes, net income less amounts set aside for other securities c, revenue less expenses related to ongoing business operations. 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 ,000. Basic earnings per share for 2012 would be: . 02, . 13, . 20, . 27. At december 31, 2011, epsilon ltd had 500,000 common shares outstanding (no preferred shares issued).